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PESTLE Analysis Examples

Before We See PESTLE Analysis Examples, Let’s Recap on the Basics.

A PESTLE analysis looks at the macro trends in the surrounding environment of a certain business or organization. It examines the political, economic, social, technological, legal, and environmental elements of the operating market that may have either positive or negative effects on your company or organization.

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A PESTLE analysis is often used as an extension of a SWOT analysis . Remember that the external matrix of the SWOT evaluates and creates awareness about the opportunities an organization should take advantage of, as well as the threats it should avoid. This external analysis is part of evaluating your organization’s strategic position within its market, industry, and larger operating environment.

Here, we will take a deep dive to examine what you should feature in your own PESTLE analysis. We’ll examine some PESTLE analysis examples from some of the most successful companies of our time.

Definitions and General PESTLE Analysis Examples:

A PESTLE analysis will look different for each industry, and it must be approached differently as well. Consider your organization’s unique position, market, and needs when conducting a PESTLE analysis.

It is easiest to begin with a SWOT analysis and then use your PESTLE as a companion piece to dig deeper into the external megatrends—both threats and opportunities—that the market and operating environment will present to your organization.

From our PESTLE analysis examples, here are some factors you may consider using:

Examples of Political Forces

These are the external forces affecting your organization that are brought on by government. They may include laws, policies, regulation or de-regulation trends, governing bodies and leadership, foreign trade and foreign relations, political issues and trends, tax policy—any political factors that could influence your organization’s opportunities or threats.

Examples of political forces include:

• Changes in government/election cycles: Will the possibility of shifting party majorities in upcoming or recent elections affect regulation or de-regulation in your industry or a related industry? Does this create a threat or an opportunity?
• Fiscal policies: How might changes in tax codes affect your budget and profits? How can you prepare for this?
• Wars and conflicts: What recent or current conflicts might affect foreign relations and/or trade in your industry? What can you do to create stability?
• Legislation changes: Is there legislation (proposed or passed) that would substantially affect your operations or your customers?
• Trade agreements: Do you see any upcoming opportunities in the form of new foreign markets? Or conversely, do you see any threats to your foreign markets?
• Political movements: What issues are becoming increasingly important to the people in your target audience? How does this affect their relationship with your brand?

Examples of Economic Forces

The economic environment you operate in includes several factors to consider, such as general economic climate, taxation, and globalization. Inflation rates, shifts in consumer spending, supply chain issues, demand curves, and global economic health may all be a part of your economic analysis.

Examples of economic forces include:

• Employment rates and compensation: Do you have a ready labor market, or are good team members hard to come by? Which direction is the trend heading? What do you need to consider in terms of compensation to bring on and keep talent in your industry?
• Inflation: How is inflation affecting the price of your materials? How is it affecting your customers and their spending?
• Currency devaluations: How is your currency—and the currency of your customer base—performing? How might this affect your costs and revenue?
• Stock market and market values: What recent or predicted trends in the stock market do you see impacting your industry and your organization?

Examples of Social Forces

Social forces focus on the opinions and attitudes of consumers that relate to your product, as well as the changing population and demographics of your operating market. Your analysis might consider social justice movements and other trends, both in your immediate environment and in the broader environment your customers are coming from.

Examples of social forces include:

• Demographic changes: What are the ages, experiences and backgrounds, and racial and gender identities of your customer base? Have any of these shifted or are they projected to shift? If so, how and why? What do you need to do to accommodate customers coming in?
• Religious beliefs: Are there religious or spiritual beliefs that intersect with your organization or your product? How can you be sensitive to those?
• Consumer opinions: How do consumers feel about your product (or products like yours)? Are there positive or negative changes in this general sentiment?
• Purchasing patterns: Due to economic or other factors, are your customers spending less in your market? More?
• Popular media: What current events, celebrity opinions, or other media influences will your consumers be tuned into? Are there any that might affect thoughts, ideas, and feelings about your organization, product, or brand?

Examples of Technological Forces

This focus area considers how technological forces may be impacting your organization. Changes in technology can affect your positioning as an organization. Some recent examples are the rise of cryptocurrency, the emergence of work-from-home technology, AI developments, and even concerns over cyber security.

Examples of technological forces include:

• Increased emergence of AI: What capabilities do you see as opportunities for your organization?
• Energy usage: What new technologies would allow you to save on energy costs (both to your organization and to the environment)?
• Cloud software: What developments have been made to cloud storage to make it more effective, and are you taking advantage of those developments? Conversely, are there security threats to be aware of in this software for your organization’s data?
• Internet: What improvements are available to maximize speed and reliability for the online work of your team?
• Technology usage incentives: Are there incentives available to encourage certain technology use?
• New machinery or tech: Are there emerging industry-specific technologies or equipment that would improve the quality, cost, or efficiency of your organization’s work?

Examples of Legal Forces

While similar to the political aspects, the legal elements in your PESTLE analysis examine the practical application of those political factors into rules and regulations that impact your organization’s business or customers. Depending on your business, you may need to consider local and state laws as well as federal laws.

Examples of legal forces include:

• Patent and intellectual rights laws: How might developments or decisions in intellectual property law affect you and/or your competitors?
• Protection laws: Are there consumer protection laws that would affect the way you interact with and do business with your customers?
• Occupational safety laws: What occupational safety laws do you need to be aware of to conduct business in a way that protects both your employees and your organization?
• Import and export laws: What legal parameters are there for ordering goods from other countries, as well as for selling your product in other countries?
• Licenses: What licenses do you, your employees, and your organization need in order to fill the roles that are needed?

Examples of Environmental Forces

Environmental factors are affected by weather, geography, climate change, and health crises. In addition to the public health crisis caused by the pandemic, the world has also been impacted by wildfires and other natural disasters across the globe. As an organization, you ought to consider the short-term and long-term impacts of these accelerating changes.

Examples of environmental forces include:

• Climate change: How might short- and long-term effects of climate change, including rising sea levels and increasing frequency of extreme weather, impact your organization and customers?
• Consumption of non-renewable resources: What necessary resources could become limited or depleted in the future that would impair your business?
• Energy alternatives:
• Gas emissions: How does your organization contribute to, and how is it affected by, gas emissions? What steps could be taken to reduce emissions and to prepare against the effect of emissions?
• Natural disasters: What natural disasters pose a threat in your area, or in the areas where many of your customers are located? How can you be prepared for these threats?
• Environmental hazards: What other hazards in your environment could prove threatening to your organization?

*Bonus: Ethical Factors to Consider

Over the last few years, business and marketing strategy experts have added a third ‘E’ to the PESTLE analysis – the ethical factor . This can include things such as fair-trade practices, child labor issues, increasing demand for conscious business models, and corporate social responsibility. As these issues come to your attention, examine the megatrends and take the opportunity to evaluate them within your organization’s environment.

Examples of ethical forces include:

• Workers’ rights: What strides can your organization make (or what strides is your organization already making) to take care of those who work for you?
• Fair trade laws: Especially concerning overseas trade, what issues do you need to be aware of in order to promote ethical and responsible practices?
• Human rights issues: How far have you followed the organizations you partner with, contract with, buy supplies from, and do other business with? Are there any organizations whose relationships need to be reconsidered due to human rights violations?
• Corporate social responsibility:
• Diversity, equity, and inclusion: What practices and attitudes are being adopted successfully to promote diverse, equitable, and inclusive workplaces? Conversely, are there practices and attitudes that are backfiring? Which might you best adapt for your organization?

6 Real-World PESTLE Analysis Examples from 8 Successful Companies:

Food and beverage industry pestle analysis examples:, starbucks pestle analysis example.

For Starbucks, lowering costs and staying aware and sensitive to the issues that are important to its customer base are two courses of action that become clear after an environmental analysis.

• Sourcing raw materials and following fair trade practices , which has gained a lot of attention from politicians in the West.
• Keeping up with laws and regulations in other countries from which Starbucks buys its raw materials.
• Economic recession , which has led many customers to seek cheaper alternatives.
• Rising labor and operational costs due to inflation.
• Retiring of the Baby Boomer generation, along with changing family patterns and lowered birth rates leading to fewer spending customers.
• Changing workstyles and lifestyles, including increased remote work .
• Enabling mobile payments , which increases the potential customer base.
• Agricultural developments that might impact raw material production.
• Introduction of caffeine consumption-related policies by health organizations.
• Industry licensing regulations.

Environmental

• Natural disasters in countries that produce coffee beans .
• Environmental laws and regulations related to packaging and waste .

Beyond Meat PESTLE Analysis Example

A California-based producer of plant-based meat substitutes, Beyond Meat is poised to take advantage of many environmental trends that could provide an opportunity to expand.

• Animal farming is receiving political pressure to cut back on expansion.
• Laws and regulations about greenhouse gas emissions.
• Vegan meat is projected to grow from 1% to 10% of meat consumption by the end of the decade.
• Vegan meat has the potential to be cheaper than animal meat , but would need drastic changes to its efficiency to realize this.
• Rise of veganism in developed countries.
• Increasing awareness and vocality of environmentally conscious citizens.
• An extensive amount of technology in R&D for this industry.
• Social media and other technological platforms for advertising and brand-building .
• New food safety standards to classify plant-based meat products.
• Soy farming has raised some concerns about deforestation and soil degradation.
• Plant-based products shown to be much more environmentally friendly than animal meats.

Retail Industry PESTLE Analysis Examples:

Walmart pestle analysis example.

Due to its size and profitability, Walmart has a uniquely competitive edge , yet its growth and continued profitability are sensitive to several external factors .

• Global differences in government regulations , such as banned products in some countries.
• Emergency curfews closing stores early.
• Inflation raising costs; brand appeal is based on low prices.
• Supply chain issues. Continued pressure on the supply chain and inflation is causing increased overhead costs.
• Business model rejected in some places, such as Germany.
• Increased trend toward online shopping , especially post-pandemic.
• Consumer push for same-day delivery of products.
• Adoption of automation for basic tasks.
• Expansion of mobile app and online services.
• Expansion of available technology in distribution and warehouse centers.
• Proposed legislation to raise minimum wage .
• Recent labor lawsuits open doors for further litigation.
• Call to reduce waste and use of nonrenewable energy.
• Weather and climate considerations in a wide number of locations.

Amazon PESTLE Analysis Example

The technology and online retail giant has many opportunities to capitalize on , with a few threats to monitor .

• Government pressure on anti-trust and monopolies for major corporations.
• Pressure from the federal government and local government about employment practices .
• Governmental regulations on cybersecurity and privacy protection.
• Increasing disposable incomes in developed countries.
• Inflation and supply chain issues impacting online stock.
• Macro-trend for organizations to seek and purchase cloud computing products and solutions.
• Increasing consumerism in developed economies and emerging economies.
• Increasing demand for same-day delivery of products to consumers.
• Increasing dependence on technology , cloud computing, and AI.
• Expansion of robotic automation for picking, packing, and delivery of the product.
• Expansion of AI to serve Amazon Web Services.
• Unionization and labor laws impact Amazon’s workforce.
• Changing import and export regulations .
• Import and export tax on goods sold.
• Increasing energy costs increase the cost of supply chain delivery.
• Environmental impact of plastic and plastic packaging .
• Carbon emissions and new fuel options as an organization.

Tech Industry PESTLE Examples:

Apple pestle analysis example.

Like other big tech companies, Apple stands to gain from growing reliance on digital technologies and movement toward energy efficiency—but so do its competitors .

• Trade disputes , especially between the U.S. and China.
• Pressure from federal regulators on antitrust .
• Increasing political pressure on consumer privacy protection and data.
• Changing economic tides and changing economic forecasts create uncertainty in the tech sector.
• Supply chain scarcity and resource constraints on product production.
• Stagnant changes to income of Apple’s buyer pool for luxury products.
• Rapid growth in emerging markets for entry-level products.
• Rising global use of mobile access across the globe.
• Increasing global dependence on digital ecosystems.
• Anti-Apple sentiment due to exclusivity and price.
• Growing technological and development capabilities of the competitive set .
• Pressure from cybercriminals threaten the data security of Apple products.
• Increasing privacy regulations and protections.
• Legal challenges to Apple’s policies and practices related to the app store .
• Ethically and efficiently recycling broken and unused electronic devices , especially those containing lithium batteries.
• Environmental impacts of manufacturing products in China.
• Climate change impacting shipping and supply chain routes .

Airbnb PESTLE Analysis Example

The unique matchup business model of Airbnb, as well as companies like Uber and Lyft, have taken the market by storm—but have also incurred significant legal battles .

• Housing laws and vacation rental bans in some markets conflict with business model.
• Varying tax rates from counties and countries.
• The housing crisis and crunch in the housing market.
• Varying prices and availability of hotels as a primary competitor.
• Increase access and desirability of travel .
• Resistance from locals about the impact of vacation rentals in residential areas .
• Social acceptance of ridesharing and travel sharing business model.
• Increased reliance on mobile apps and other digital solutions .
• Increasing security of online payment systems.
• Legal challenges in some states and countries.
• Environmental impact of single-use products for hospitality .

What is the purpose of conducting a PESTLE analysis? 

A PESTLE analysis can help you understand where your organization stands in the external market and assess the macro-trends that could potentially affect your business/product.

What are all the components of a PESTLE analysis?

A PESTLE analysis looks at six aspects of the environment that could impact your organization: Political, Economic, Sociological, Technological, and the two newly added — Legal and Environmental. Some PESTLE analyses even incorporate ‘ethics.’

What does PESTLE stand for?

Two things you should always consider as you’re going through each aspect of the PESTLE analysis are: where am I now, and where do I want to go? These two questions will guide you in figuring out your current state in the macro environment and your ideal state. Next, it’s important that with each factor or event you outline in your PESTLE, you also consider whether they pose an opportunity or a threat.

Thanks for sharing….extremely useful

Thank you for sharing ..it has helped

Thanks very helpful for understanding the concept of PESTLE analysis.

Very insightful and pratical. Helpful indeed Thank you

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How to Conduct a PESTLE Analysis Explained with Example

Free Market Analysis Kit

Ayush Jalan

• January 2, 2024

While a business plan outlines the process of building, running, and maintaining your business, it’s not enough to survive in the market. To make sure that your business stands the test of time, you need to arm yourself with strong and reliable business tools.

This is where business frameworks like PESTLE, SWOT, and Porter’s Five Forces can prove to be useful. They help you understand your business environment and break down long-term goals into bite-sized tasks. This allows you to streamline activities using actionable data.

In this article, we’ll focus on PESTLE analysis . We will see what it is, how it works, how to conduct it, and also see an example to help you get a better idea.

Table of Contents

What Is PESTLE Analysis?

When is pestle analysis conducted, 6 factors of the pestle framework, how to conduct a pestle analysis, example of pestle analysis.

PESTLE is an acronym for Political, Economic, Social, Technological, Legal, and Environmental factors. It’s a business framework that focuses on these six external influences on your company. It is often used in conjunction with other business frameworks.

Entrepreneurs use it to gather info about various external factors affecting their company. This helps get a bird’s-eye view of the business landscape which leads to better decision-making and protects against risks.

A PESTLE analysis is conducted:

• Before the launch of new products or services
• Before venturing into a new market
• To find new opportunities in the existing industry
• To analyze the changing environment of your industry

The PESTLE framework looks at your business environment from six different angles. By analyzing each, you can optimize your business activities according to the changes and trends in your industry.

Let’s understand these factors in detail.

1. Political

The first factor looks at the political powers affecting your business. This includes tax policies, political stability, environmental regulations, and trade barriers like tariffs, quotas, embargos, etc. These can also include government policies applicable to all business activity or particular to your industry.

For instance, say the government levies a special tax on iron. Manufacturing companies that use iron as a raw material will then see an increase in their COGS (cost of goods sold). As a consequence, this will affect the price of their offerings and net profit .

2. Economic

Economic factors include inflation, the standard of living, the unemployment rate, economic growth/decline, interest rates, the fiscal year followed in the country, foreign exchange rate, and economic stability.

For example, a recession causes unemployment and hence a decrease in people’s purchasing power. This results in reduced production of goods due to low demand and may even cause entrepreneurs to exit their businesses .

Unlike the above two, the social factor focuses on the things that influence your target market. Given the unpredictable changes in the demographics of your audience, social factors often tend to be highly volatile.

Social factors include cultural trends, religious beliefs, literacy rate, population growth, demographics, social classes, etc. These factors influence the buying pattern of your target customers, and hence, the sales of your products or services.

For instance, with the changes in people’s dietary habits, food outlets are expected to offer products accordingly. A person following veganism expects a fast food restaurant to provide diverse vegan options.

In other words, businesses tailor their offerings according to the changing needs and want of their customers.

4. Technological

Technological factors refer to the technological developments impacting your business. This may be the way you manufacture your products or the way you market and sell them. This includes advances in machinery, software, and equipment that can aid or harm your business.

For instance, a store may use gesture recognition to help people with disabilities such as hearing, speaking, or other motor impairments. This can help drive sales with increased inclusivity and convenience for customers with special needs.

Legal factors refer to the laws your company has to abide by. These legal factors include consumer laws, labor laws, copyright laws, import/export laws, etc. If you do business overseas, you must follow the trade laws of your home country as well as the importing country.

These factors influence the development of products and operations of your business. For instance, an automobile company follows the set safety guidelines while manufacturing vehicles. This includes using qualifying materials, adding safety exits, etc.

6. Environmental

Environmental factors reflect your business’s surrounding ecological environment. This includes weather conditions, seasonal climate, geographical location , global climate effects, energy consumption, waste disposal, carbon emissions, etc.

These factors influence your sales, customers’ opinions about your brand, and your business operations. For instance, the rise in global warming has led companies to shift to more sustainable energy resources and opt for better waste disposal solutions.

STEP 1: Select the objective and scope of analysis

The first step is to determine the purpose of your analysis and its scope. This includes the geographical locations you are targeting, the extent of data you will need, and the relevant factors to your business. Being aware of your goal helps you avoid going off track while researching.

STEP 2: Conduct research for all six factors

Next, research each of the six factors. Gather the information relevant to you. Use reliable sources such as case studies, government reports, and high-authority websites to enhance the quality of your information.

You can also outsource this task to research firms if you can bear the costs. However, doing it yourself can help you understand your business better. If you are unsure of where to begin, you can start by asking these questions:

• Political: How and to what extent do national and international politics affect your business operations?
• Economical: What are the economic trends that may impact your company in the future? How volatile are the economies of the countries you work in?
• Social: What are the factors that affect your target customers’ buying behavior? Did you notice any trend among your customers recently? Technological: How old is the machinery and/or equipment in your company? Is there a need to upgrade to newer models to grow?
• Legal: What are the laws in the country/countries that you operate in? Are you facing any legal issues that can impact your brand image?
• Environmental: Is your product seasonal? Does your product require a certain kind of weather condition to manufacture? What are your initiatives toward sustainability and other environmental issues?

STEP 3: Interpret and organize data into relevant categories

Now it’s time to put all this data together. Start by writing your company’s description i.e. who you are and what you do. Next, write down your findings from the research such as your repeat customer stats, recent impact on market share due to sudden economic change, etc.

Illustrate this information according to the order of the framework. You can represent the six factors in the form of a matrix for simplicity (see the example below). Finally, conclude the report with a summary of the analysis.

STEP 4: Put the data to use

After gathering, organizing, and interpreting all the information from your PESTLE analysis, it’s time to put this data to use by making predictions, changing strategies, reallocating resources, safeguarding investments, etc.

Be sure to communicate these changes to your team to execute a quick and smooth switch. This will help your team stay on the same page and not deviate too far away from the company goals.

PESTLE analysis of Nestlé

Nestlé is the world’s largest FMCG multinational giant, operating in over 190 countries. The Swiss-based company was founded in 1866 by Henri Nestlé. As of 2021, its net sales amount to USD 93 billion, employing over 273,000 people

Make Better Decisions with a PESTLE analysis

Building a business comes with a great deal of unpredictability. Luckily, tools like the PESTLE analysis can help you navigate unknown waters. Research your external business environment to find valuable facts and gain a macro picture of your industry. Use this info to make better decisions and stay ahead of the game.

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About the Author

Ayush is a writer with an academic background in business and marketing. Being a tech-enthusiast, he likes to keep a sharp eye on the latest tech gadgets and innovations. When he's not working, you can find him writing poetry, gaming, playing the ukulele, catching up with friends, and indulging in creative philosophies.

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How To Do A Pestle Analysis In 6 Steps

A PESTLE analysis is a tried-and-true approach for identifying macro-environmental factors that might impact an organization.

This type of assessment can help teams with strategic decision-making, business analyses, and navigating periods of change. 

But, if you’re doing strategic planning for a large organization, division, or multiple SBUs, performing a PESTLE analysis quickly, accurately, and consistently can be challenging to get right.

This article will cover everything you need to know to complete a PESTLE analysis for your organization, including when you should do it, and how to combine it with other strategic frameworks.

• PESTLE, PESTEL or PEST analysis is a strategic framework used to identify macroenvironmental influences on an organization of a business.
• The PESTLE framework divides external influences into six sections: Political, Economic, Social, Technological, Legal, and Environmental.
• Pros: PESTLE is simple to understand and use, making it a good framework for businesses of all sizes.
• Cons: The validity of PESTLE assessment largely depends on the quality and amount of information available to an organization.

⚠️ Go beyond the forecast! Understanding external factors is crucial, but strategic advantage comes from action. Cascade Strategy Execution Platform bridges the gap between analysis and execution. Talk to our experts to transform your PESTLE insights into an actionable plan for navigating change and seizing opportunities.

When Should You Do a PESTLE Analysis?

While it may not be needed for all strategy-related activities, every company has multiple use cases for PESTLE analyses. Here are a few common examples:

• Strategic planning: PESTLE is a useful starting point for most strategic decision-makers and it can help lay the groundwork for more in-depth research. 
• Reviewing market position : Companies can use PESTLE to better understand shifts in market position over time and contextualize organizational growth, decline, or stagnation.
• Marketing planning: PESTLE can offer marketing teams valuable insights into external factors that impact marketing, PR, and advertising projects.
• Product development: PESTLE is helpful for understanding consumer sentiment from various angles and can assist organizations that want to know how products should be designed, changed, or marketed.
• Organizational change: Whether an organization is changing direction, restructuring, or expanding, a PESTLE analysis, combined with other strategic frameworks , can provide valuable information about external factors that will impact transformation initiatives.

What Are the 6 Elements Of PESTLE?

A PESTLE or PESTEL analysis divides macroenvironmental elements into six categories, each of which can impact an organization differently. Here are the six PESTLE factors:

Political factors

Political factors relate to the political interactions between governments, countries, and various political actors. 

For example:

• Diplomatic relations between countries
• Political stability and continuity
• How governments operate
• The prevalence of civil society
• The potential for political unrest
• Foreign trade policies

Economic factors

These encompass the key economic elements within the business environment that can impact your organization.

• Exchange rates
• Interest rates
• Economic growth rates
• Corporate taxation rates
• Unemployment rates

Social factors

Social factors or sociocultural factors define group consumer behavior and thinking. They can include quantitative, such as average age, and qualitative data, such as opinions.

• Demographics
• Education levels
• Social views
• Age distribution
• Disposable income
• Cultural stability

Technological factors

Technological factors are tech-related developments, shifts, and patterns that could directly or indirectly impact your business. This can include broader global or regional conditions.

• Internet connectivity
• Specific technologies, like automation
• Advancements in your industry
• Intellectual property
• Rate of technological change
• Research and development lifecycles

Legal factors 

Legal factors are current laws, regulations, and bills that may affect the organization’s operations and future plans. 

• Competitive regulations
• Health and safety regulations
• Government policy
• Tax policies
• Antitrust laws
• Import/export laws

Environmental factors

Environmental or ecological factors look at the impact of businesses on the environment and how the environment might affect the business.  

• Natural disasters
• Weather patterns
• Consumer health
• Climate change
• Resource availability

How Do You Do a PESTLE Analysis Step By Step?

While there is no clearly defined way of doing a PESTLE analysis from start to finish, a systematic planning process and approach can increase efficiency and impact.  

Here are six steps to do a PESTLE analysis the right way.

1. Prepare for your analysis 

Before you begin, lay the groundwork to ensure accuracy, quality, and focus. The saying “measure twice, cut once” will pay dividends down the line.

Create a founding document that answers these questions:

• Why — The reason you’re conducting a PESTLE analysis.
• What — The scope, goals , and initiatives.
• Who — The key people needed in the analysis process. 
• Where —  Where are we going to look for information?
• When — The deadlines for the data and final insights.

Answering these questions will explain how to approach your PESTLE analysis. 

Finally, organize a meeting with involved team members and stakeholders to present the plan, communicate success metrics, and get feedback.

2. Collect data for your PESTLE analysis

Gather the information you need to fill out your PESTLE diagram. This may require primary research and consultation with external industry experts. You will likely need various types of data and information.

But don’t get bogged down in data and research. A PESTLE analysis is meant to speed up traditional research by focusing your efforts.

To streamline the process, concentrate on one area at a time and address them sequentially according to the acronym. That way, team efforts can be focused, and progress tracking can be easier.

3. Complete a PESTLE diagram

It’s time to make sense of your research by putting the collected information into a PESTLE diagram. 

Remember that PESTLE analysis aims to cut through the noise and provide a clear idea of the external environmental influences to consider.

Divide the factors and segment them appropriately, making them easy to understand for the rest of the team. For example, if you are listing social factors, divide this list into sub-sections, such as consumer behavior, cultural norms, and work-related matters.

4. Interpret and evaluate your results

Use this information to interpret the macroenvironmental factors that can impact your organization's future plan and come up with strategies to handle them. 

Remember, not all factors will have the same impact and importance to your organization. You can use tools like a risk matrix to assess the probability of occurrence and impact on your organization. This will help you to focus your efforts and prioritize strategic initiatives . 

Add additional context to your analysis by including data from other strategic frameworks you’re using, such as a 7S Model , Porter’s Five Forces, or GE Matrix . 

Each strategic framework offers a different perspective to help with:

• Understanding how macroenvironmental factors intersect and interact.
• Spotting missed opportunities and threats for your business.
• Determining how your organization is best-equipped to handle potential issues.

5. Put together an action plan

Use insights from your PESTLE diagram and other strategic analyses to create an action plan that addresses identified risks, threats, and opportunities. 

For example, the rising logistical cost (a combination of technological and economic factors) of moving products to particular markets could be handled in a number of ways, such as: 

• Shifting the organization’s growth focus to other markets.
• Insourcing key parts of the logistics chain.
• Revising the organization’s pricing strategy.
• Developing internal capacities to build components.
• Outsourcing production to a third party in another country.
• Lobbying governments to reduce trade tariffs and excise fees.

Once your plan is in place, start executing .

6. Review and monitor external signals

New technology can disrupt an industry, diplomatic relations can sour, and customer sentiment can shift. 

Any strategy that doesn’t evolve and adapt won’t have an actual impact. Make sure that revision and monitoring are fundamental parts of your strategic processes.

You need to treat strategy, execution, and analysis as complementary elements if you want to create an adaptive strategy and successfully manage disruptions.

💡Tip: Use a strategy execution platform like Cascade to speed up and improve strategic business planning and execution. With Cascade, you can plan, measure, and report on strategic initiatives all in one place. By bringing your team in, you can collaborate on shared goals without spending time in meetings to keep everyone aligned.

PESTLE Analysis Example: Starbucks

Starbucks is well known across the world with 32,000 locations in over 80 countries. Here’s an example of how a PESTLE analysis might look for this global coffee brand:

• Political awareness and activism in different countries. 
• Political sentiment towards ethical sourcing strategies and conformance to “Fair Trade” practices.
• The possibility of war or conflict in regions that have Starbucks locations.
• Sanctions and diplomatic relations between the U.S. and other countries.
• Economic recessions or booms in specific countries.
• Fluctuating exchange rates impacting supply chain activities.
• The average income of Starbucks customers.
• Operational costs in different cities, states, and countries.
• Consumer behavior in response to economic conditions.
• Changing consumer preferences and buying habits around coffee.
• Specific preferences based on region, culture, and history.
• Age groups of people who drink Starbucks coffee.
• Changing work patterns (remote vs location-based work).

Technological

• The increased use of at-home coffee brewing equipment.
• The shift towards digital avenues of marketing and interaction.
• The growing use of e-commerce globally.
• Technological innovations in coffee agriculture and processing methods.
• Infringement on the Starbucks logo, color scheme, and other copyrights.
• Varying tax obligations in different regions.
• Customs, tariffs, and import requirements.
• Compliance with specific workplace legislation.
• Health and safety regulations in factories, stores, and other facilities.

Environmental

• Farming and processing impacts, such as water usage and carbon footprint.
• The effect of single-use packaging, such as paper and plastic cups, and straws, on the environment.
• Extreme weather and natural disasters in areas where Starbucks coffee is farmed.

📚 Recommended reading: 

Strategy study: How Starbucks Became Everyone's Cup Of Coffee

What Are PESTLE Advantages?  

• Provides additional context for business direction and strategic planning .
• It helps strategic planners quickly identify external threats and opportunities.
• Organizations can use PESTLE to better understand the impact of different risks on their business strategy.
• It can be combined with other strategic analyses , such as SWOT, to accurately identify an organization's position in the market.

What Are PESTLE Disadvantages?  

• If efforts aren’t focused, research and data collection can become overwhelming.
• PESTLE shouldn’t be considered a one-off task and should be done repeatedly.
• External factors can rapidly change, meaning a PESTLE analysis has a limited validity window. 
• The accuracy of PESTLE relies on the quality and amount of data available to an organization.

PESTLE vs SWOT Analysis: How To Use Both?

Take your strategic analysis further by combining PESTLE with a SWOT analysis . SWOT can help interpret the data from a PESTLE analysis by contextualizing it with your business’s unique strengths and weaknesses.

Both analytical frameworks have their place in strategic planning. However, using both will give a complete picture of your business’s position, potential, and risks.

Turn Insights Into Results With Strategy Execution Software 🚀

A PESTLE analysis can identify macroenvironmental factors that can impact organizations. But strategic planners need more than analytics and insights to execute a business approach that will actually have an impact.

And, if your processes are fragmented, uncoordinated, and stuck in the planning phase, you won’t reap the full benefits of PESTLE or any strategy planning tool .

That’s where Cascade comes in. Cascade’s strategy execution platform is purpose-built to help businesses spend less time planning and more time executing what matters.

Get started for free or schedule a call with a Cascade expert to see how you can hit more goals and deliver business results faster. 

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How to do a PESTLE analysis (a guide in 7 steps)

Alex Walton

What is pestle analysis.

A PESTLE analysis (or PESTEL analysis, sometimes simplified to PEST analysis) is a strategic planning framework that has you examine six types of external factors that can impact an organization: Political, economic, social, technological, legal, and environmental factors.

PESTLE analysis gives you context for your strategic decision-making, which you can use to improve your strategic plans.

The six components of PESTLE analysis

PESTLE analysis has you break down the external factors that impact your organization into six categories.

When performing the analysis, you’ll consider how the current state of each of these buckets might impact your business, its profitability, and its prospects in the short and long term.

Let’s examine each one in detail:

• Political factors.
• Economic factors.
• Social factors.
• Technological factors.
• Legal factors.
• Environmental factors.

Political factors

Political factors encompass everything from government policies to political unrest.

If one country’s government doesn’t see eye-to-eye with the government of another, this might affect your decisions on whether to do business internationally with suppliers located in that country.

As another example, the breakdown of relations between governments can lead to changes in international trade policy. These changes might make it harder for you to sell your products overseas.

The relative political stability of a country also matters. An organization looking to go multinational is unlikely to choose to set up a sister office in a country dogged by political unrest.

• Presence and strength of international trade agreements.
• Governmental policy incentivizing or limiting business activity.
• Political unrest vs. political stability.

Economic factors

PESTLE’s Economic category concerns everything to do with the economy of your own country, countries you do business with, and countries where a large percentage of your target market resides.

For example, fluctuating exchange rates should be of particular interest. If your organization is in the U.S., and you do frequent business with the United Kingdom, the strength or weakness of the GBP/USD exchange rate will impact your business decisions (and your bottom line.)

The economic policy of any country of interest, decided by their Central Bank, might also factor into your strategic plans. Interest rate hikes attract money from overseas, but also affect consumer attitudes toward spending.

Also, if labor is cheap in another country, or you can source crucial materials more affordably there, it might serve as a cost-effective base of operations for you. Planning to open up shop there could be a great strategic decision.

Here’s a short list of economic factors to consider:

• Strength/weakness of relevant currencies.
• Inflation and interest rates.
• Labor costs.
• Unemployment rates.
• Economic growth vs. recession.

Social factors

The court of public opinion matters.

It decides what’s in or out of favor at that moment. If you’re caught up in controversy and the public’s judgment doesn’t fall in your favor, wider consumer attitudes towards your brand, your products, and, ultimately, your bottom line are bound to be affected.

You can take a more granular approach to the social factors of a PESTLE analysis by incorporating what you already know about your established market segments .

For example, factors like level of education, age, and disposable income can influence who you decide to market to most heavily. Or whether there are specific times of the month or year when certain market segments are most open to receiving your messaging and spending with you.

Other social factors to consider include:

• Accepted norms vs. taboos.
• Immigration and emigration, and what that means for your targetable demographics.
• Levels of unemployment.
• Social mobility and associated beliefs.

Technological factors

We all know it: Technology has the power to disrupt.

It can change entire industries, render entire job roles obsolete, and make the once-impossible possible.

New technologies can help you, or they can hurt you.

They can automate processes , making your entire operation more efficient. Or they can offer high-tech alternatives that leave your products and services obsolete in the eyes of the consumer.

So they should certainly factor into your strategic planning sessions.

But, since new technology is inherently unpredictable, it’s difficult to make accurate predictions.

So here’s how to approach this: Of all the infinite things that could happen, what finite selection of these things is most likely to happen? In addition, what one or two other things, though unlikely, would be so catastrophic (or miraculous, when they constitute opportunities rather than threats) should they occur, that you’d be mad not to give them a place in your plan?

Deal with these things .

Here are some technological factors to consider in your PESTLE analysis:

• Emergence of new technologies and how they might affect the ways you do business.
• Technology that enables vs. technology that inhibits or challenges.
• Software vs. hardware advancements.
• Consumer technology devices and usage.

Legal factors

The legal factors in a PESTLE analysis are those that influence how you run your business and, as a result, your associated costs and profitability.

Legislative bodies can pass laws that, for example, make it harder for you to break into a new industry.

Your products might suddenly need to pass stringent tests before they can go to market, for instance. Creating models capable of passing those more stringent tests can be expensive.

Or, a new law could make it hard or impossible for you to market to a certain group of people who’ve so far made up the majority of your target demographic.

Here are some legal factors to consider during your analysis:

• Laws that limit or enable competition and competitive diversity.
• Health & safety legislation that might affect your responsibilities to your employees or customers.
• Laws on compensation requirements (like the minimum wage).
• Antitrust laws.
• Data protection laws.
• Advertising standards.

Environmental factors

Finally, we come to the environmental factors.

Here’s an example: Solar panel manufacturers are much more likely to have success in sunny states like Nevada or California than in Washington. In fact, this manufacturer might deprioritize entire countries, like the infamously overcast U.K., in favor of sunnier locales.

The potential for natural disasters might also factor in. Areas that experience a lot of earthquakes might make up the entire target market for an organization that specializes in building earthquake-safe structures. But this org might not have a presence at all in countries that never experience earthquakes.

Other considerations, like waste management and emissions, as well as related taxation or incentives, should factor into your strategic plans.

Here’s a short list of other possible environmental factors to think about:

• The potential for natural disasters in or near a place of business.
• Prevalence and emergence of disease (possible and actual).
• Sustainability responsibilities, such as recycling and waste management, or emissions targets and related taxation or incentives.
• Concern for endangered species and all wildlife.

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• The five top challenges you face performing SWOT, and how to solve them.
• The best ways to measure success or failure post-SWOT.
• Whether SWOT is falling out of favor in modern businesses.
• The best alternative frameworks and how they compare with SWOT.
• The future of SWOT analysis.

PESTLE analysis: advantages and disadvantages

We’ve covered a lot so far already. Before we get stuck into how to actually perform one, it’s worth briefly going over some of PESTLE analysis’ core strengths and weaknesses. 

This will help you decide when it’s appropriate to use it,

What are the advantages of PESTLE analysis?

• Goes in-depth on external macro factors that can play into longer-term industry trends.
• Provides context on your strategic business decisions.
• Helps you identify both threats and opportunities in your competitive landscape.
• Fits neatly into other frameworks, like SWOT analysis , for examination of external factors.

What are the disadvantages of PESTLE analysis?

• Combine with other frameworks, like SWOT analysis, for best results.
• Difficult to perform. How do you foresee all the possible factors? What if you miss something?
• Won’t help you identify existing blind spots, which can render your analysis less effective.

How to do a PESTLE analysis

Okay, so we’re familiar with each of PESTLE’s buckets, and what might factor into each one.

What does the process for performing a PESTLE analysis actually look like?

The good news is, the process for performing PESTLE analysis is much the same as for performing any kind of competitive analysis or for facilitating strategic planning .

Here’s the seven-step process:

• Establish goals and objectives.
• Collect data.
• Analyze collected data.
• Create a response plan.
• Operationalize and action your strategic plan.
• Monitor and adjust.

1) Establish goals and objectives

As with any analysis, your first step is to get crystal clear on what it is you want to accomplish.

Are you trying to establish a competitive advantage? If so, you’ll be interested in the opportunities and threats your competitive environment has to offer. PESTLE analysis can clarify where these lie, and how to exploit them.

Are you trying to get a handle on where the market might be headed? Brainstorming through the six components of PESTLE analysis can help you get ahead of industry trends and anticipate key market events.

Getting clear on your primary objectives as your first step will inform the rest of your analysis, so don’t skip this part.

Next up, it’s time to prepare.

Any analysis like this is time-consuming. While you can perform PESTLE analysis in microcosm – brainstorming on your own – you’ll get the best results if you involve people or teams from across the business, even if only in a small way.

And if you’re involving a lot of other people, you’ll need to be respectful of their time, which means figuring out an efficient way to canvass them all and get their input.

Interviews, surveys, and even a general call out on Slack or Teams for input can work.

At this point, you’ll want to take care of tasks like:

• Gauging interest and availability for interviews or meetings.
• Booking out meeting rooms.
• Sending out calendar invites.
• Deciding on questions and creating survey forms.
• Sending necessary messages.
• Creating and assigning other miscellaneous tasks.

3) Collect data

Now it’s time to collect the data.

If you’ve got time, collecting case studies is a hugely useful exercise.

Records of specific events in the recent past, and how they affected your org (or another organization you or someone else used to work at) make for great learning opportunities and will help you forecast future events.

By this point, everything should be set up, so all that’s left for you to do is ask your questions, hold your meetings, and collect the necessary data.

4) Analyze your data

With your data collected, it’s time for the actual analysis to begin. The goal here is first to process all of your information, and then to tease out meaningful conclusions. You’re looking to answer this question:

What do your findings mean for your business?

Chances are, much of the data you collect will be text-based… but – wait!

You don’t have to do all the data processing yourself. Remember, just as technology can disrupt, it can also enable. Generative AI is the perfect tool here for helping you whip through text data, structured data, and even numeric data at super speeds.

Here’s an example workflow:

• Have an automated transcription tool note down everything said in all your meetings.
• Offload it to your chat-based AI of choice for aggregation, deduplication, and summarization.
• Your AI tool already knows what PESTLE analysis is, so ask it to run one on the information you’ve given it.

Your AI’s conclusions can serve as the basis of your own analysis, or as a handy second opinion, depending on how much you trust AI tools.

Whether you use AI, a human assistant, or your own brainpower to digest all that intel, you end this step when you’ve pored over everything, and drawn meaningful conclusions about what it all means for your org.

5) Create a response plan

Now that you know what your findings mean for your business, you can figure out what to do about them.

While the data gathering and data analysis parts of the process are time intensive, it’s perhaps this step that’s most important.

Your response plan should be based on your conclusions about what the data you’ve uncovered means for your business. And, of course, this should be informed by, and aligned with, the key objective for the analysis you outlined right at the start.

For any decisive conclusions you’ve reached (like opportunities, or looming threats you need to address), figure out what needs to be done and break this down into a series of actionable steps.

These action points form the basis of the next stage…

6) Operationalize and action your strategic plan

So you know what needs doing.

All that’s left is to translate your steps into your project management software.

This way, everything gets tracked. Every task has its details and an assigned owner. Build project boards where necessary with dependencies between tasks, so there’s visibility into any issues or blockers.

For more on this, check out: How to operationalize a strategic plan .

7) Monitor and adjust

No plan can be perfect.

So build flexibility into the plan as a core feature from the start.

Don’t make your plan, its due dates, its action steps so rigid the whole thing falls apart if a prediction doesn’t come to pass, or a primary deadline gets missed.

Monitor the progress and effectiveness of your strategic plan as time passes. Accept it, with all its imperfections, and make the necessary adjustments to maximize your competitive advantage and exploit every possible market opportunity.

We’ve covered a lot… let’s sum up!

🌍 PESTLE analysis sees you examine six external macro factors (Political, Economic, Social, Technological, Legal, Environmental) that affect your organization.

The framework helps provide context for your strategic planning and business decision-making.

💰 For economic factors, keep an eye on exchange rates, inflation, interest rates, labor costs, and economic policies. They can directly influence your bottom line.

🧲 Remember that new technology can help, or it can hurt. Ask yourself whether any emerging technologies could automate your processes, or otherwise save you costs.

💼 When performing a PESTLE analysis, begin with the end in mind. Figure out where you want to get to before you start, and consider employing an AI tool to help you digest all that data.

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What Is PEST Analysis?

• How It Works
• Applications

The Bottom Line

• Corporate Finance
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What Is PEST Analysis? Its Applications and Uses in Business

Investopedia / Ellen Lindner

PEST analysis (political, economic, social, and technological) is a management method whereby an organization can assess major external factors that influence its operation in order to become more competitive in the market. As described by the acronym, those four areas are central to this model.

A popular variation on the PEST analysis format, especially in the U.K., is the PESTLE strategic planning approach, which includes the additional aspects of legal and environmental.

Key Takeaways

• PEST analysis stands for political, economic, social, and technological.
• This type of analysis is used to gauge external factors that could impact the profitability of a company.
• Generally, it is more effective with larger organizations that are more likely to experience the effects of macro events.
• PEST analysis is commonly used in conjunction with SWOT analysis, which stands for strengths, weaknesses, opportunities, and threats.

Understanding PEST Analysis

It is believed that PEST analysis was first introduced under the name ETPS by Harvard professor Francis J. Aguilar. In the 1967 publication "Scanning the Business Environment," Aguilar presented the economic, technical, political, and social factors as being major influences on the business environment. Subsequently, the letters were rearranged to create a convenient and quirky acronym used today.

The core of PEST analysis is the belief that a comprehensive assessment of the major areas of influence that affect the sector in which an organization is positioned, as well as the organization itself, can facilitate more effective strategic planning.

This planning can be undertaken to maximize the organization’s ability to capitalize on conditions as they exist and to be forewarned of and better prepared for imminent changes, allowing the organization to stay ahead of competitors.

Components of PEST Analysis

Political: The political aspect of PEST analysis focuses on the areas in which government policy and/or changes in legislation affect the economy, the specific industry, and the organization in question. Areas of policy that may particularly affect an organization include tax and employment laws. The general political climate of a nation or region, as well as international relations , can also greatly influence the organization.

Economic: The economic portion of the analysis targets the key factors of interest and exchange rates , economic growth, supply and demand , inflation , and recession.

Social: The social factors that may be included in a PEST analysis are demographics and age distribution, cultural attitudes, and workplace and lifestyle trends.

Technological: The technological component considers the specific role and development of technologies within the sector and organization, as well as the wider uses, trends, and changes in technology. Government spending on technological research may also be a point of interest in this area.

Applications of PEST Analysis

PEST analysis can assist an organization in recognizing and thereby capitalizing on opportunities offered by existing conditions in the business environment. It can also be used for identifying current or possible future challenges, allowing for effective planning of how to best manage these challenges.

PEST analysis can also be applied in assessing the in-house structure of an organization in order to identify strengths and weaknesses in its internal politics, economic outlook , social climate, and technology base. The results of this analysis can facilitate changes or improvements in areas identified as subpar.

PEST analysis can be used in conjunction with other forms of strategic business analysis, such as the SWOT (strengths, weaknesses, opportunities, and threats) model, for an even more comprehensive result. Conducting a comparison between these completed analyses can provide a very solid basis for informed decision-making.

What Is PEST vs. PESTLE Analysis?

PEST analysis stands for "political, economic, social, and technological" whereas PESTLE stands for the same but adds "legal" and "environmental" factors to the analysis. These areas are considered when assessing the impact of external factors on a company's profitability.

How Do You Do a PEST Analysis?

To do a PEST analysis, you must consider the different factors under each category (political, economic, social, and technological), and how these factors affect your business. For the political component, you would assess laws, regulations, government policies, and tariffs, for example. For the economic component, some of the topics you would assess would include access to financing, cost of living, interest rates, inflation, and labor costs. For the social component, you would consider consumer trends and behaviors, education, division of wealth, population growth rates, and health. For the technological component, you would assess areas such as artificial intelligence growth, innovation, research and development, social networking, and cybersecurity.

How Often Should a PEST Analysis Be Done?

A PEST analysis can be done as often as a business would like. It is good to perform a PEST analysis when there have been significant changes that may impact a business, such as a change in interest rates, new government policies, or the introduction of new technology. It should be done often so as not to become outdated.

By analyzing the political, economic, societal, and technological factors that impact its business, a company can plan, reorganize, and adjust to these external factors in order to become a more successful operation. A business's success is not only predicated on how well it internally manages its operations but also on how it functions in the larger world. PEST analysis helps it to succeed in that aspect.

Chartered Institute of Personnel and Development. “ PESTLE Analysis .”

Rastogi, Nitank and Trivedi, M.K. “ PESTLE Technique—A Tool to Identify External Risks in Construction Projects .” International Research Journal of Engineering and Technology , vol. 3, no 1, 2016, pp. 385-386.

PESTLE Analysis. “ What Is PESTLE Analysis? An Important Business Analysis Tool .”

PESTLE Analysis. “ What Is a SWOT Analysis? 2 Examples of What It’s Used For .”

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PESTLE Analysis: Explained with Examples & Templates

Edraw content team, do you want to use pestle analysis.

EdrawMind helps move ideas forward, faster and better. Learn from this PESTLE Analysis complete guide to know everything about PESTLE. Just try it free now!

1. What is PESTLE Analysis?

The PESTLE analysis is a tool to identify macro (external) forces an organization faces in its business. More specifically, PESTLE analysis studies the external challenges of a business. And guides to overcome them.

The external challenges are Political, Economic, Social, Technological, Legal, and Environmental. The word "PESTLE" is an acronym for these six factors.

PESTLE analysis is an important marketing tool. It helps every business identify significant changes in the broad business background, thus helping in better strategic business planning.

There are many variants of the analysis to fulfill the needs of businesses with unique requirements. They can use variants as per their needs. For example, if the technological factor doesn't matter to an industry, they can choose a variant that excludes it. A few widely used variants of PESTLE analysis are STEEPLE, SLEPT, and PESEL.

2. What are the 6 PESTLE Factors? With Complete Lists

Now we'll discuss each factor of the PESTLE analysis with examples and try to understand how they impact a business.

1. Political:

The P stands for political, the first and an essential factor of the PESTLE analysis model. Political factor determines how government and government policy may impact a business. Here we analyze the government's policy-making patterns regarding business laws and regulations like tax guidelines. It also deals with business to political relations and their impacts on the overall market. The political stability or instability in a country and their possible outcomes. Government's behavior with businesses in general. The political factors deal with such and many other questions.

Summarization of the political sub-factors:

• Government stability
• Political policy
• Tax guideline
• Fiscal laws
• Trade regulation
• Safety regulation
• Employment laws

2. Economic:

E stands for economic. The economy significantly affects a business's organizational operations. For example, equipment prices and maintenance costs increase with inflation and interest rates increment. Also, with a rise in the currency exchange rate, the duty on imports of raw materials increases, ultimately leading to a rise in the product price. The economy directly impacts the growth and performance of the industry. The end consumer's financial state is also essential. An affordable and quality production puts a base of a successful business; we can achieve it only when the economic factor is carefully analyzed.

Summarization of economic sub-factors:

• Inflation rates
• Interest rates
• Economic growth
• Employment or unemployment rates
• Currency exchange rates
• Raw material costs

S is for social . This factor helps a business understand its end consumer needs. The focus remains on the social environment, public behavior, and identifying emerging trends among the people. It deals with the customers' values, hopes, desires, and fears. It also discusses what motivates or disgusts the general masses and why. Careful analysis of social factors is crucial for a good business plan and strategy. The social factor helps companies do a robust customer analysis to solve their customers' problems with their products or service.

Summarization of social sub-factors:

• Demographic characteristics
• Education levels
• Custom and values of the population
• Cultural trends
• Attitude changes
• Changes in lifestyles

4. Technological:

Technological factors consider the rate of technological development and innovation that could affect a market or industry. Technology is overgrowing, and the industry should be able to acquire that technology as soon as possible to remain in the race before the competition overtakes the market.

Technology also poses threats. For example, it is also possible that a particular product could be replaced by a much cheaper and more advanced alternative of another company. Therefore, keeping oneself updated on the new trends and advancements in an industry is necessary. Every organization must possess the latest technology required to develop and enhance its products or services.

Summarization of technological sub-factors:

• Changes in digital or mobile technology
• Development

It is crucial for an organization to know what is legal and allowed within the territories of the country they operate. They also must be aware of any possible change in laws or legislation in the country and its impact on industry operations.

Summarization of legal sub-factors:

• Employment legislation
• Consumer law
• Healthy and public safety
• Local trade regulation and restrictions
• International trade regulation and prohibitions

6. Environmental:

A successful business model gives importance to the environment . Carbon footprint, climate change, and waste disposal are critical for it. Also, the environmental impacts are essential for the low cost and good quality production. For example, a product suitable for a cold atmosphere should be prepared in a low-temperature area rather than investing in air conditioning. Also, proper environmental conditions ensure that the products remain fine for a more extended period

Summarization of environmental sub-factors:

• Recycling procedures
• Carbon footprint
• Waste disposal
• Sustainability

3. When to use PESTLE Analysis?

PESTLE analysis is used before a strategic business decision. The analysis effectively detects and understands broad, long-term trends in the business background. Therefore, it is extensively used in a range of business planning situations. Let's see where we can use it.

Strategic business planning

With PESTLE analysis, we can obtain contextual information about the business direction, whether the business is growing or not? Growth targets, brand positioning, and risks to productivity ratios.

Expansion of the business

The PESTLE analysis may also help determine when and where a business should expand. It could be determined by considering labor costs, tax laws, and the need for the product where the industry plans to expand.

Workforce Planning

PESTLE analysis can help to plan the required workforce for an organization. For example, a technical workforce will be required for a technology-related business. PESTLE analysis help to choose the right workforce by considering factors like availability of labor, availability of skilled labor, and the cost.

Product development

A PESTLE analysis help determines if a product or service still fulfills the needs of the consumers in the marketplace. It may also tell what product would suit the current market conditions. Also, it reveals why a product fails or succeeds in similar business conditions.

Marketing Planning

PESTLE analysis helps in marketing a brand or product effectively. It deals with the factors required to sell a product proficiently to the customers. Many major organizations use the PESTLE analysis for product promotion and marketing.

Organizational change is a PESTLE analysis example. It deals with the possible opportunities and threats around labor changes, such as skills, increment or decrement in the labor cost, shortages, or current workforce capabilities.

4. How to do PESTLE Analysis?

Before doing PESTLE analysis, it is better to arrange a team of experts for the task. A team could be organized based on six PESTLE factors. It is necessary to obtain information on each area of the PESTLE model. Every element has its importance. If anything is left out, the analysis would not be much helpful. Therefore, field experts are required for this analysis, i.e., a technical team member could be hired to research the technological aspects. Likewise, an environmentalist could be employed to study the environmental factors.

There are ten steps to take to do a successful PESTLE analysis.

• Identify the scope of research that covers the present and possible future scenarios.
• Decide who will collect the information and how.
• Identify appropriate sources of information.
• Gather the information. Make sure to arrange the information correctly to be used again easily.
• What did you find? Analyze the information carefully.
• Make a list and put the items in terms of their importance. Most important things go first, and less important things go last.
• Identify the options you have to address the issues.
• A discussion document for all stakeholders.
• Discuss the findings with stakeholders.
• Discuss the plan and decide on actions to take.

5. PESTLE Analysis Examples

Here are three examples of PESTLE analysis of three highly successful companies.

Amazon PESTLE analysis indicates the significant threats that might pose a problem for the company. Also, it shows the growing opportunities that are being developed with the ever-increasing technology and economy-these opportunities aid in holding their place in the online market.

Google PESTLE Analysis tells that they have many opportunities and some threats. They must prepare a solid plan which can aid them to survive in the highly certain economic factors in any competitive market. Google Should develop a more secure medium for the users.

Tesla's PESTLE Analysis example highlights many vital elements that have been helpful in the company's growth. From the economic perspective, the company has many challenges, but at the same time, from environmental and technological factors company's rapid growth is evident.

6. Pros and Cons of PESTLE Analysis

It encourages critical thinking.

It helps to prepare the business for the future.

It helps to manage business risks and threats.

It helps businesses capitalize on new opportunities.

It is a straightforward approach with a simple framework.

It takes a lot of time to process.

It involves many steps.

It needs to be done at regular intervals.

External factors could change quickly, so it cannot be easy to present and analyze up-to-date information.

7. Key Takeaways

PESTLE analysis helps in the development and growth of businesses and organizations. It helps to analyze strong and weak areas of industries. A proper PESTLE analysis report may help you grow your business. With EdrawMind, you can create eye-appealing PESTLE analysis graphs and reports for your business with a few clicks and easily share them with your team members. You can also select from 100s of already present templates and customize them according to your needs.

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What is a PESTLE Analysis? Understanding Macro-Environmental Factors

Raquel Alberdi

May 2, 2021

Every business is subject to its macro-environmental factors . That is to say, external factors outside of a business’s control (think the economy, environment, politics, etc.).

This is because a business can’t operate within a vacuum. The total addressable market will always impact it in some way, shape, or form.

And it’s a crazy old world we live in!

So, to mitigate its exposure to these external factors a business must be able to analyze its position and identify potential risks . This will help it better adapt to the uncertain changes that characterize the economy.

Now, there are several tried and tested tools for conducting an external analysis. Most of which, you’ve probably come across before:

SWOT Analysis

Porter’s Five Forces

Scenario Planning

Global Competitiveness Index

But perhaps the most important of them all is the PESTLE Analysis Framework .

What is PESTLE Analysis?

A PESTLE analysis, or sometimes referred to as a PEST or PESTEL analysis, is a business framework used to analyze the macro-environmental factors that impact a company’s overall performance.

The framework is broken down into 6 key external factors :

Environmental

Technological

Analyzing each factor is especially useful when entering an unknown market (especially abroad) or starting a new business .

As mentioned before, successful companies often use PESTLE analysis in conjunction with other macro-environment analysis tools such as SWOT and Porter’s Five Forces.

This gives businesses a thorough understanding of their position and a better ability to assess the risks specific to their industry.

With that wrapped up, let’s explore each external factor in more detail.

Political Factors

Political factors explore to what degree a government can influence, change, and impact your industry.

This could be through:

Foreign trade policy

Political stability

Trade restrictions

Environmental laws

Government policy also impacts areas such as healthcare , and education so will also need to be taken into consideration if related to your industry.

Economic Factors

These are factors that directly impact the economy’s performance (and indirectly, your business).

Some examples are:

Inflation rates

Interest rates

Economic growth

Unemployment rates

Median household income

Stock market trends

Budget deficit

Changs or fluctuations to any one of these factors could impact a company’s purchasing power , product pricing , and market supply and demand .

Social Factors

Social factors focus on the cultural norms, customs, and values of a specific demographic where a company operates.

Potential social factors include:

Education standard

Cultural trends

Age distribution

Population growth rates

Health and safety policies

Buying habits

Racial equality

Fully understanding the social environment within which you operate helps you identify both risks and opportunities perhaps missed by your competitors.

Technological Factors

Technological factors determine the level of innovation, research, and development within an industry and the potential impact it could have.

This could be identified by changes in:

Mobile technology

R&D capacity

Digital technology

Internet and communication infrastructure

Manufacturing technology

Distribution methods

Levels of automation

Most businesses tend to focus heavily on the impact of digital technology. However, while clearly important, development in heavy industry , manufacturing, and distribution networks shouldn’t be overlooked either.

Legal Factors

Clearly, businesses must be aware of the “laws of the land” where they operate. It’s also vital to remain abreast of any upcoming legislation changes and whether or not it impacts your business.

Some potential legal factors include:

Antitrust laws

Taxation laws

Consumer protection laws

Health and safety regulations

Employment laws

Copyright and patent laws

Data protection laws

Environmental Factors

Finally, you’ll need to look at the potential impact environmental factors could have on your business.

With consumers increasingly judging brands against their CSR (corporate sustainability responsibility) and the rise of global warming, these factors are typically ecological, and can include:

Ethical product sourcing

Regional NGO (non-profit organization) pressure

Environmental offsets

Renewable energy availability

Natural resources

What is the difference between PESTEL and PESTLE Analysis?

There is none.

PESTEL and PESTLE analysis are the same things. They’re both acronyms for a macro-environmental business analysis framework.

The only difference is someone, somewhere, decided to swap the two last letters around causing utter chaos in business circles.

PESTLE is: P : Political E : Economic S : Social T : Technological L : Legal E : Environmental

...and PESTEL is: P : Political E : Economic S : Social T : Technological E : Environmental L : Legal

How to do a PESTLE Analysis

Undertaking a PESTLE analysis audit is simple. There’s a 4-step process for using the analysis framework and identifying specific external risks and how they affect your industry or business.

Step 1 - Brainstorm External Factors

The first thing to do is use the PESTLE framework to brainstorm all the external factors (from each of the 6 areas) in your industry. The key here is specificity . You’ll get value from the audit if it’s tailored to your business.

You might find using a PESTLE analysis template like the one below useful for your brainstorming session:

Step 2 - Identify Threats

The next thing to do is identify how these external factors could undermine or impact your business .

For example, if you’re in the oil and gas industry, any changes to consumer protection laws, local NGO pressure, and environmental concerns would heavily impact your business.

Just as the age distribution would impact your decision to open a toy store in a small town. 

Step 3 - Take Action

If identified early, strategies can be put in place to minimize risk or enhance impact if the outcome is positive.

Step 4 - Review and Revise

To be effective, a PESTLE analysis should be conducted on an ongoing basis . Businesses that keep on top of macro-environmental factors, their changes, and the potential impact they have to give themselves a serious edge over their competitors.

PESTLE Analysis of Apple

To give you a better understanding of how the PESTLE analysis model works, I want to run through a real-life example of a well-known brand. And frankly, I can’t think of a better example than Apple!

So, let’s take a look. 

Apple is an American technology company (we all know that) so what does that mean for the external political factors it faces?

Well, Apple Inc. just posted its highest quarterly revenue (a whopping $100-billion quarter ) meaning it’s subject to higher corporate taxation in the U.S.

Another political factor it has to consider is souring relations between the U.S. and China. In 2018, President Trump began adding tariffs to Chinese imports, sparking a trade war between the two countries.

This had a knock-on effect on Apple.

They source a lot of their parts from Chinese manufacturers meaning:

Parts might have to be sourced outside of China

Become a target for Chinese nationalist anti-American rhetoric

See a reduction in popularity of their products in countries such as Japan

With this knowledge, Apple can begin to draw up contingency plans to minimize its risk exposure.

There’s both good and bad news on the economic front for China.

Apple’s products are largely sold in developed countries with typically strong, stable economies. There’s little risk of their target market weakening economically.

Furthermore, the economic growth rates of developing nations, particularly in Asia, means there are a host of new opportunities for Apple to expand its presence in previously inaccessible markets .

However, the “China” problem expands into the economic arena. Increased labor costs elsewhere could weaken the cost advantage of certain Apple products. 

Society dictates that almost everyone needs a mobile phone these days. This is due to the increasing popularity of mobile-first social media platforms such as Whatsapp , TikTok , and Instagram

While it’s rather sad to see families sitting around the dinner table with eyes glued to screens, it’s good news for Apple.

People, at least for the time being, are socially mandated to buy smartphones.

However, China’s going to crop up again due to external social factors.

There are ethical concerns from many consumers about the purchase of products made in China. Their treatment of the Uighurs and imposition of strict new laws in Hong Kong has seen their public opinion just fall through the floor.

As tensions continue to rise, Apple might be forced to review its policy of working closely with the giant Asian superpower.

One growing external technological factor that’s of definite interest to Apple is the increasing use of mobile devices in business and education.

In fact, our students frequently attest to our business program’s online mobile accessibility as one of its standout features. It allows them to self-educate around their busy schedules, as and when it suits them.

Also, many businesses are turning to mobile devices to help their workforce. An example of this would be field sales reps using iPads to access their CRM data .

However, Apple isn't the only one with skin in the technology game.

Their primary competitors Samsung and Google are hot on their heels. Google, for example, was able to roll out Android Pay less than a year after Apple Pay.

Increasing public concern about privacy and the invasive nature of modern digital advertising , governments are applying more pressure to software companies to be more open with their data usage .

This legal threat could potentially be problematic for iPads to access their CRM data .

It’s also no secret that Apple is planning on entering the automotive industry. This is another highly-regulated industry with potential insurance and litigation costs to cover.

Environment Factors

As a software company, Apple will always be susceptible to increased rates of electricity .

Not just because of the maintenance of data centers, but the number of manufacturing facilities it relies on to mass-produce its products.

Also, China.

There are still concerns about the handling of their manufacturing facilities regarding pollution and lack of investment in renewable energy sources .

If this external pressure increases, Apple may be forced to seek out new, expensive, alternative production facilities

Applying PESTLE Analysis To Your Business

Right, now it’s over to you!

Use the PESTLE analysis template provided in Step #1 to assess the macro-environmental factors affecting your business.

Remember, while the PESTLE analysis is a great tool, it should be used in conjunction with other analysis techniques such as SWOT and Porter’s Five Forces .

Also, don’t forget to conduct your analysis on a bi-monthly basis . The world’s moving fast and things are changing at an unprecedented rate. Falling behind competitors could be devastating for your business!

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PESTLE Analysis: The Macro-Environmental Analysis Explained

by Martin Heubel

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Unstable market conditions are one of the biggest threats to the success of any company. For decades, managers have used the PESTLE framework to assess the opportunities and risks of their organisation’s macro environment.

Events such as the Brexit referendum or the coronavirus pandemic have had a significant impact on the way companies operate. But even smaller changes such as the introduction of new laws or technologies can pose a significant threat and force companies to react quickly.

If political and macro-economic changes are not recognised by businesses and included in their strategic planning process , attentive competitors can easily take advantage of this shortcoming.

But worry not! Today, you’re going to learn how to analyse your businesses macro environment with the PESTLE framework.

This article will cover:

Political Factors

Economic factors, social factors, technological factors, legal factors, environmental factors.

• How to do a PESTLE Analysis (incl. Template)

What is PESTLE Analysis

The PESTLE analysis is a concept first mentioned by Harvard Business School professor Francis J. Aguilar. He introduced the framework back in 1964 in his book “ Scanning the Business Environment “.

Since then, the PESTLE analysis has become a popular strategic tool to assess the macro environment of organisations worldwide.

The framework categorises the six forces of p olitics, e conomics, s ocio-culture, t echnology, e nvironment and l aw.

The PESTLE framework begins with an analysis of the political landscape. That’s because the political stability of a country is probably the biggest priority for any commercial organization.

Unstable conditions or extreme changes in government direction pose a major threat to ongoing operations. They can also lead to a dependency on political goodwill, making it almost impossible to operate economically.

While this is less likely to be the case in democratic states, totalitarian states often have centrally controlled economic systems. These severely restrict any form of business activities or even make them impossible in the first place.

For example, in conflict regions where civil wars prevail, or political power changes are frequent, companies are better off building local distribution networks than setting up nationwide production facilities.

But also relatively stable political conditions can pose challenges:

Take the European Union as an example:

Different legislative, anti-trust, and tax guidelines apply in each country. German domestic and foreign policies will differ widely from the ones in France or Poland.

Organisations need to be aware of the political movements in countries they operate in to minimise the risk of becoming the target of government action.

Typical political factors of a PESTLE analysis, include:

• Government policies
• Political stability
• Foreign trade policies
• Tax policies
• Labour laws
• Trade restrictions

In addition to the political situation, economic aspects play an important role when assessing a company’s macro environment.

The factors to be considered are manifold:

Currency stability, wealth and income distribution, unemployment rates, economic growth rates, wage costs or inflation rates are only a small excerpt of what managers should consider when analysing macroeconomic factors.

These factors can have a direct impact on the growth and profitability of a company.

Before entering a market, decision-makers must ask themselves whether the market is economically attractive and suitable for the intended operation.

Typical economical factors of a PESTLE analysis, include:

• Economic growth
• Exchange rates
• Interest rates
• Inflation rates
• Disposable income
• Unemployment rates

Following on from the economic analysis of a market, the analysis of socio-cultural characteristics provides an insight into the existing values, norms, institutions, education levels and consumption patterns of a population.

Put simply, this information allows businesses to outline the structures and values of a society.

However, managers need to take extra care in this part of the PESTLE analysis:

That’s because they often fall victim to predefined stereotypes when analysing geographically-distant markets.

The socio-cultural factors should always be assessed by several stakeholders with different backgrounds to ensure an objective evaluation of a market.

Typical social factors of a PESTLE analysis, include:

• Population growth rate
• Age distribution
• Career attitudes
• Safety emphasis
• Health consciousness
• Lifestyle attitudes
• Cultural barriers

In today’s age, almost every company is dependent on modern technologies.

Whether it’s due to the use of digital sales channels or the precise manufacturing of products with modern production facilities.

The rise in technological complexities also increasingly influence strategic decisions in companies.

When assessing environmental factors with the PESTLE framework, decision-makers must consider the technological progress of their time.

Managers can do this by asking a set of questions, like:

• Does the technological progress and infrastructure of a region meet the requirements of the plans to build a new manufacturing plant?
• Do specific technological standards exist with the entry into a new market, which must be met to build an effective supply chain?
• Are there any emerging technologies posing a threat of substitution ?

Typical technological factors of a PESTLE analysis, include:

• Technology incentives
• Level of innovation
• R&D activity
• Technological change
• Technological awareness

The legal framework is a central component in the analysis of a company’s macro environment. Even though this area is ranked at the lower end of the PESTLE framework, it is the most important for many companies.

For example, organisations within the EU have to consider at least three legal systems :

• The legislation in the country of the headquarters or production,
• The respective legal system of the country or countries in which the products are sold.
• Additional laws from the European Union that facilitate (or limit) business activities.

These legal systems often deprive managers of the flexibility they seek.

Advertising bans for certain product categories or special requirements for product design must be considered and taken into account on a country by country basis.

The resulting challenges often affect the entire marketing mix and can be costly to solve.

Typical legal factors of a PESTLE analysis, include:

• Discrimination laws
• Antitrust laws
• Employment laws
• Consumer protection laws
• Copyright and patent laws
• Health and safety laws

Environmental factors not only assess the climatic and topographical conditions of a country. They also evaluate a country’s availability of resources.

This is important, as products in regions with extreme climatic conditions have to meet different requirements than in their country of origin.

A car in the desert of Dubai has to meet different criteria than in Germany. European carmakers had to adjust their production to ensure their cars would stop catching fire in the UAE, following multiple reports back in 2005.

Geographical distances also pose a challenge for the distribution of products.

Mountains, rivers or other geographical conditions can quickly become a hurdle for transporting raw materials or goods.

Managers must carefully consider whether the ecological-geographical conditions of a region match their organisation’s strategic ambitions.

Typical environmental factors of a PESTLE analysis, include:

• Environmental policies
• Climate change
• Pressure from NGO’s

How to do a PESTLE Analysis (Free PDF Template)

Conducting the PESTLE analysis can be overwhelming. But with my easy-to-use template, it becomes a lot more manageable!

Simply print out the below template and start researching your industry.

A couple of great places to start your research are:

• statista.com
• ec.europa.eu

Free PESTLE Template

Simply click on the image to get redirected to the high-res PDF.

Over the past decades, the PESTLE Analysis has proven to be an effective concept to assess an organisation’s macro environment.

Its simple setup allows managers to anticipate future business threats and to take action to avoid or minimise their impact by incorporating them into their organisation’s strategic decision-making.

As with any analysis, it reflects the moment and is based on the current knowledge of those carrying it out. That’s why it is recommended to conduct the PESTLE analysis regularly.

Need help analysing your macro-environment?

If you want to better understand the factors that affect your business, get in touch . I offer tailored advice to help you assess your macro environment.

Enjoyed this article? Here are more things you might like:

What is Business Strategy? – Increase your chances of success and understand what it takes to build an effective business strategy.

Porter’s Five Forces Analysis – A complete guide to Michael E. Porter’s 5 Forces Analysis to help you assess your competitive landscape.

The Product Life Cycle – A complete breakdown of the individual stages of the product life cycle to plan your next marketing moves.

How to SWOT and PESTLE Analyse a Business Plan

Article by Eshani Jain .

Got a business idea? Great. But, that’s just the first part of the puzzle of going forward with your startup. If you do not want your startup to blow up in a smoke, you need a real business plan – one that has been vetted by SWOT and PESTLE analysis. 

A plan will guide the way forward for your company, how you’ll conduct the varied activities of your organization, how you’ll put your finances to use and the way will you outrun your competitors to realize your pre-determined goals.  But creating the plan is not enough. You also need to put it to the test. You need to see if your plan can actually survive in the real world before you jump in with your business. And for that we use the-

• SWOT Analysis 
• PESTLE Analysis

These analysis may seem like a bother, but they are key for any business looking to make an impact. While SWOT test is a much broader test, which predominantly analyses the internals of a business plan, the PESTLE test analyses whether the plan is sufficient in the environment where you want to create your startup.

And so, let’s get started!

What is SWOT Analysis?

SWOT stands for the four parameters that the technique examines: Strengths, Weakness, Opportunities, and Threats. It’s an analysis technique that permits you to develop a business strategy that helps you to stand out from your competitors and become a successful venture. It is pretty much used everywhere, including startups, companies that have been around for a long time, non-profit organizations, government units, and individuals. 

The tool assesses the four aspects of the business and helps in identifying the key parts of your business that require improvements in order to survive in a competitive market. It specifies the objectives of the business and identifies the interior and external factors that pose favorable or unfavorable to the business.

How to Do a SWOT Analysis?

A SWOT analysis is conducted by organizing a brainstorming session of varied members of a corporation who hold different stakes within the business and have different stands and perspectives. 

Representatives from different departments of the corporate like management, sales, customer service, production, etc. should all be a part of the meeting so that they can contribute their ideas, making the SWOT analysis successful. All the contributed ideas are categorized under strengths, weaknesses, opportunities, and threats. 

To efficiently categorize each characteristic of the corporate and therefore the factor affecting it we need to know each element of the analysis individually.

Strengths of a business include the factors that set the business aside from its competitors and provides it an upper hand within the market. 

The strength of a business is often within the sort of its property, human resources, technology, physical resources, etc. It is often its USP (unique selling proposition) but it is not limited to it and may even be any aspect of your organization that gives you an advantage. 

It is simply the things that your business does the best and the qualities or characteristics that set it aside from the others. They’re the attributes that enhance the competitiveness of a business in its marketplace.

To identify your strengths, you need to ask yourself the following questions:

• Do you have enough financial resources that allow you to conduct your operations at ease?
• What advantages do you have over your market rivals?
• What sets you apart?
• What helps you attract your customers?
• How competent is your human capital / employees?
• What’s your unique selling proposition?
• What makes your product different from similar products within the market?
• How many vast geographical areas does your product cover?
• How strong is your public image / branding?
• Do you have any cost advantage over your customers?

Like strengths, weaknesses also are an inherent feature of companies. 

Weakness is something a corporation lacks which puts it at a disadvantage in the market against its competitors.  

Weaknesses are often in the form of lack of resources, untrained human capital, inferior intellectual capital, an unclear unique selling proposition, an unorganised communication system within a startup , and inferior skills and capabilities of the corporate in its key areas. 

Understanding your weakness allows you to take the necessary measures to overcome them and strive towards becoming a better organisation otherwise your weaknesses make you vulnerable within the marketplace.

To identify your weaknesses, you need to ask yourself and / or your team the following questions:

• Is your business financially stable? Is its working capital strategy sound?
• Is your customer base sufficient?
• Are your company’s human resources working in harmony?
• Are your customers being offered better services by your rivals than you?
• Is your USP (unique selling proposition) unique?
• Are you making a profit using your current business practices?
• Is there enough coordination between various departments of your organisation?
• Is your product range versatile enough?
• What’s your brand’s public image?
• What features of your product are inferior to those of your competitors’?

Opportunity

Opportunities are positive externalities within the marketplace which will end up being highly lucrative and beneficial for your business if grabbed at the right time. 

Identifying opportunities within the marketplace may be a difficult task and requires tons of alertness and understanding of the business environment. A business before grabbing a chance that the market presents thereto must make certain whether it has the required financial capital, human capital, technology, and other resources at its disposal. 

Opportunities allow your business to compete successfully and lead within the marketplace. For example, most businesses believe cashing in on Augmented Reality and Data analytics can be vastly helpful for them to boost their business growth.

To identify opportunities for your business within the marketplace, you need to ask yourself, your business partners and/or your employees the following questions:

• Do you think it’s the proper time to expand your business in an alternative territory?
• Is your business versatile enough to launch new product lines?
• Can your business cash in on the new technological developments emerging in marketplaces?
• Are you able to take over your rival companies if they’re becoming weak?
• Are the features of your product unique enough to draw in a bigger customer base?
• Are you in a position to take advantage of falling export barriers?
• Are you on an edge to make alliances to expand your business?
• Are you able to meet the rising product demands within the marketplace?

These are the factors in a corporation’s external environment that make a detrimental effect on the profitability and well-being of a company. 

A firm has no control over these negative external factors, it can just take as many measures as possible to safeguard its business from suffering high losses. 

Threats can appear in the form of emerging competitors, negative public image, negative customer feedback, shifts in market requirements, changing market trends, etc. 

A company’s management must identify the threats to the company’s prospects and take necessary strategic actions to reduce the impact of such threats. 

For example, prototyping is a great way to identify threats when a business is framing a business model .

To identify threats for your business within the marketplace, you need to ponder over the subsequent questions:

• What impact will slowdown in market growth have on your business?
• How can technological advancements affect your venture?
• What impact will low entry barriers into the marketplace wear your business?
• Will your company lose some of its profit if foreign trade policies are made more restrictive?
• Will an increase within the price of any key input of your business impact your revenue?
• How badly will a shift in consumer tastes and expectations affect your business?
• How can increased competition affect your business?
• Are your business strategies competent enough to adapt to the changing business environment?

External and Internal Factors

Strength, weakness, opportunity, and threats can further be classified into two groups: Internal and External factors. 

Internal factors comprise things that structure the strength and weaknesses of a corporation. 

These factors are within the control of a business and it has the power to alter them, for instance, a corporation falling short with its financial capital is categorized as a weakness but it’s still within the control of the organisation to extend and try to get more funding , making it an indoor factor to the organisation. Similarly, a great revenue model may be an internal strength factor of a company while a bad one will be an internal weakness.

External factors are the factors beyond the control of a corporation. They include macroeconomic matters, socio-cultural changes, technological changes, legislative changes, policy alterations, etc. 

Opportunities and threats occur because of the external factors to a business over which the business has little or no or no control. You can only attempt to lessen the impact of a threat on your business and if it is an opportunity, you can try to grab it.  Take for instance, emerging competitors within the market.  Categorising the 4 elements into internal and external factors allows a corporation to differentiate between the factors on which it has a control and on which it doesn’t. 

When can SWOT Analysis be used for Your Business Plan

• It is often used to explore new solutions for problems.
• Decide on strategies that can be easily pursued to achieve the objectives of the business,   in  view of the prevailing business environment 
• To brainstorm and analyze the prevailing plans to get any fallout if present.
• It is often used for pre-crisis planning and preventive management.
• It can be used to develop a recommendation during a viability study.

What does SWOT Analysis Reveal in a Business Plan?

After finishing your SWOT analysis, a corporation identifies its weaknesses and helps in risk mitigration as well as provides for a detailed analysis of the opportunities it may have and the strengths using which it may capture certain opportunities.

This process helps your startup to formulate strategies keeping in mind the internal strengths that will help you seize opportunities as and when presented by the market. Using these strategies the business can make the best use of its competitive assets and efficiently compete against the threats posed by the marketplace and its competitors. 

It also helps the business to understand how vulnerable its key aspects are and in what way they have to be rectified; for instance, high operational costs of a corporation make it competitively vulnerable in the marketplace which may pose to be a big pitfall for the business , therefore, the management needs to pay a lot of attention on that.

What is PESTLE Analysis?

It is a strategic analysis and management tool that identifies, analyzes, organizes, and keeps a track of key macro-environmental factors that have an impact on the working and financial soundness of an organization. 

PESTLE is an acronym for Political, Economic, Social, Technological, Legal and Environmental. This framework examines opportunities and threats caused by political, economic, social, technological, legal, and environmental forces. 

There are many adaptations / variations of the original framework which examine different combinations of external factors specifically to cater to the needs of different industries. 

Few variations are STEPE, STEEPLE, DESTEP, SPLIT, etc. 

PESTLE and its variations are mostly used by businesses, researchers, government organizations, and non-profit organizations. 

Startups tend to use this tool to analyze the environment and examine if any of these factors affect the performance of the business. 

Government organizations use it to understand the effects, the environmental factors may have on their introduction of new laws, policies or funding regulations and lastly non-profit organizations use the tool to analyze the effect of changes in macro-economic factors upon their cause.

The six factors that the acronym PESTLE stands for are:

Political Factors

Political factors relate to the actions of the government. Political factors include tax policy, fiscal policy, foreign trade policies, trade restrictions, consumer laws, political climate, and political stability. 

It can also include certain goods and services that the government wants to provide or does not want to provide or imposition of import tariffs by the Government.

Political policies have an impact on all sectors of business. 

It may be health, education, or infrastructure though the magnitude of the impact may vary from industry to industry. For example, a change in foreign trade policy will have a higher impact on export-oriented business rather than a local business.

Some questions you may need to ponder about so as to understand how political factors affect your business are:

• Will a change in political power have an impact on your business?
• Will political instability in the country affect your organization?
• Will the introduction of new tax policies have an impact on your revenue generation?
• Do trade restrictions limit the scope of your business?
• Does a change in labour laws have a favourable or detrimental effect for your business?
• Is a change in the Consumer Protection statute beneficial or problematic for your business?
• Is your business practice in tune with the data privacy laws?

Economic Factors

Economic factors include economic growth, inflation rates, interest rates, exchange rates, unemployment rates, trade deficit and surplus, per-capita domestic product, etc. 

These factors have an impact on operational and financial activities of almost every business that exists. However, it is possible that an economic change that may affect one industry negatively but simultaneously have a positive outcome for another. 

A change in exchange rates has a significant impact on the cost of exporting goods and the price of supplying imported goods. Similarly, a change in market interest rates impacts a firm’s decisions regarding expansion and development.

Think about these questions to understand how economic factors affect your business:

• How does the unemployment rate in the country affect your labour costs?
• Will an increase in interest rates affect the growth of your organization?
• How will a spike in prices in the economy affect the demand for your goods and services?
• Are consumers saving or spending too much on similar products or services?

Socio-cultural Factors

Socio-cultural factors are the forces within cultures and societies that have an impact on the behavior and feelings of humans. 

The factors include attitudes, societal values, cultural influences, ethnic values, population size and growth rate, age distribution, and lifestyles that impact the demand for goods and services. Sociological forces vary from place to place and from time to time. 

High trends in social factors have a huge influence on the working and popularity of businesses. 

For example, a trend towards healthier lifestyles leads to a shift in customer base from alcohol and fast food towards organic vegetables, gyms, and healthier food options. Similarly, various factors of the socio-cultural environment have an immense influence on healthcare, entertainment, travel, and hospitality industries.

An interesting case study is the “Go Vegan” movement , which was just a fringe movement that now has far-reaching effects all over the world.

Some questions you may ask to understand what affects socio-cultural factors have on your business:

• Does a change in the attitude of customers towards saving and investment influence your business?
• Do the changing fashion trends affect your sales?
• Do people’s lifestyle changes have an impact on the sales of your product or service?
• Does the inclination of people towards green products have an ascendancy on your product sales?

Technological Factors

Technological factors include research & development activity, technological change, automation, and technological development. These factors can have a plethora of effects on your startup. 

Due to rapidly changing technology, there is a transformation in the quality and innovation of products. 

These technological factors also have an influence on the costs and prices of products in the market. The factors also encourage the birth of new industries by ongoing innovations such as connected wearable devices however they can also be the reason for the death of various industries that become outdated or obsolete. 

They also influence the outsourcing and production level decisions of a firm. Moore’s law which had predicted the doubling of semiconductors in transistors every year, is now being used to predict the compounded growth of technology in all sectors.

In fact, most investors try to jump on the trend to capitulate on interesting and innovative businesses.

Some questions you may ask to understand what technological factors affect your business:

• Does the introduction of automation by your competitors affect your business?
• Can further advancement in the technological environment make you go out of business?
• Does growing e-commerce have an impact on your business?
• Does constant innovation of new products make your product obsolete?
• Is the technology sector ripe for disruption?
• Has any platform democratised the participation of the masses in any field of tech?
• Can you open-source an important source code or program so as to boost innovation in your startup?

Legal and Regulatory Factors

Legal and Regulatory factors include rules, regulations, and laws with which companies must comply such as labour laws, consumer laws, employment laws, antitrust laws, discrimination law, financial service regulations, and health and safety regulations. 

Some regulations and laws are industry-specific whereas others affect all businesses. These factors influence the company’s operations, costs, and other key elements.  Ponder over these questions to help gain an understanding of what legal and regulatory factors affect your business:

• Will a change in consumer law have an impact on your business practices?
• Can labour laws influence your company’s wage rates and tie down your competitiveness? 
• Does your business fall under the purview of a specific regulation governing the industry? For example, real estate regulations and insurance laws.
• Is the Government planning for any disruption in any sector anytime soon?

Environmental Factors

Environmental factors include ecological and environmental forces such as climate, weather, climate change, and water shortages. 

These factors have a direct impact on certain industries like farming, tourism, energy production, and insurance and an indirect impact on various others like transportation and utilities. 

Moreover, the rising awareness of climate change and global warming is affecting the way companies operate and lead to a shift in the demands of customers.

Some questions you may need to ask yourself to understand what environmental factors affect your business:

• Will the limited availability of non-renewable goods have an impact on your business?
• Can a change in the climate of your place influence your business?
• Will water shortage in your industrial area have an impact on your business?
• Can you use an exponential technology in the present environmental conditions?

The Porter’s Five Forces analysis is a great tool for analyzing environmental factors.

Benefits of using PESTLE Analysis on your Business Plan

• It is an extremely cost-effective technique, the only thing it costs is time.
• PESTLE analysis helps you in evaluating your business plan from every angle, highlighting every way in which an environmental factor can have a direct or indirect impact on your business.
• PESTLE analysis helps you in examining every environmental change and thus making you prepared to sustain any negative changes by formulating strategies in advance.
• The Analysis keeps you updated with all social trends enabling you to seize any opportunity that the market presents.
• PESTLE Analysis helps you to assess and analyze the implications of entering a new market.
• It is an extremely easy and efficient framework-tool to use.

When can PESTLE Analysis be used on a Business Plan?

• It can be used before launching a business as certain businesses require you to adhere to strict rules and regulations.
• It can be used when an organization faces a problem. An organization should conduct a PESTLE Analysis to discover if the cause of the problem it is facing is only one or there might be more associated causes or problems.
• To identify the driving forces in the market.

What does the PESTLE Analysis reveal in a Business Plan?

A PESTLE Analysis helps you in understanding your organization’s market and business position a lot better. 

It gives you an overview of the various external factors that might influence your business. It helps you to conduct full market research of your existing market or the market you wish to enter in the near future. 

It allows you to reevaluate and reconsider your business strategies in light of the external factors which might have an indirect or direct impact on your organization. It enables startup executives to make more knowledgeable and informed decisions and plan more strategically.

Wrapping up on the Business Plan SWOT and PESTLE Test

That’s all. As you can see, these analysis are complementary to each other and are not two ways to do the same thing. These analysis should be used if you want to develop a solid business that blows its competitors out of the water!

And once it you do the analysis, you can go in to develop the product or service that you wish to sell. But before you go all in, it’s important that you follow the tried and tested principles of business development – that is, conduct a competitor research and use design thinking principles to your product/ business development processes.

First, create a proof of concept , then an MVP and then, and then only create the full and final product / service.

I hope you liked this article. If you did, let me know your thoughts in the comments and do share the article with your startup co-founders and management team.

Read Next: How You Can Use Digital Marketing for Your Business

Author Bio:  Eshani Jain , the author of this article is a student of Bachelor of Commerce (Hons) at Kamala Nehru College, DU.

About The Author

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How to do a PEST analysis

Lucid Content

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As a business leader, you understand the importance of staying ahead of the curve, but changes outside your control are constantly influencing your business. If you don’t take the time to identify and understand these external factors, you could be leaving money on the table—or worse, endangering the business itself.

The PEST analysis helps entrepreneurs discover what factors could impact their business and develop strategies to handle those changes. In this article, you will learn the of a PEST analysis and how to complete one.

What is a PEST analysis?

Originally developed in 1967 by Harvard professor Francis Aguilar, PEST analysis is a strategic planning tool that helps organizations identify and evaluate threats and opportunities for the business.

PEST is an acronym describing four primary external factors that influence the business environment: political, economic, socio-cultural, and technological.

Goals of a PEST analysis

The main purpose of PEST analysis is to understand what external forces may affect your organization and how those factors could create opportunities or threats to your business.

PEST analysis helps you:

• Understand current external influences on the business so you can work on facts rather than assumptions.
• Identify what factors could change in the future.
• Mitigate risks and take advantage of opportunities to remain competitive.
• Develop a better long-term strategy.

PEST is particularly useful for understanding the overall market environment. The more threats or risk factors in the market, the more difficult it is to do business. By analyzing the market forces at play, the more strategic you can be in your planning and decision-making.

Additionally, PEST analysis helps organizations strategically plan projects and initiatives so that you only focus on projects that have the greatest chance of success. It also gives you the tools to forecast changes so you can grow your organization with those changes instead of working against them.

PEST vs. SWOT analysis

PEST and SWOT analysis are often used together to better understand the business environment. However, the two frameworks are distinct and apply to different levels of business analysis.

PEST analysis focuses on the big picture and impacts on the overall business, market, and important decisions. PEST is best used for market research and broader analysis of the business environment.

On the other hand, SWOT analysis hones in more narrowly on the organization itself to identify its strengths, weaknesses, opportunities, and threats. A SWOT analysis is often conducted at the beginning of a new project or to evaluate a product line.

Combining these macro- and micro-level analyses of your business will help you understand a complete picture of your market and your business’s unique opportunities so you can mitigate risks and effectively plan for the future.

When to do a PEST analysis

A PEST analysis is best used when you need a big-picture understanding of your business. Some of the best times to do a PEST analysis include:

• When you’re starting a new business
• When you uncover a major problem
• When/if your business is pivoting
• When you recognize impending changes in one area (e.g., politics) and want to re-evaluate the market

Keep in mind that PEST analyses are macro-level evaluations. 

Conducting a PEST analysis is fairly straightforward, but it can be time-consuming. Use the following steps to help you conduct your next PEST analysis—just be sure to give yourself plenty of time to do a thorough evaluation.

1. Consider PEST factors that could impact your business

The first step is to research and gather as much information about your organization’s external influences as possible. Enlist the help of other leaders or managers in the business to ensure you have a comprehensive data set.

As you start brainstorming and gathering data, consider the following list of PEST examples to guide your research:

P: Political factors

Political factors look at how legal and governmental regulations, as well as the political climate, might affect your organization’s freedom to operate and its ultimate profitability.

These factors might include:

• Upcoming local, state, or national elections
• Main political candidates and their views on different policies
• Government regulation of industry or competition
• Trade policies (e.g., tariffs, current or prospective trade deals, etc.)
• Level of corruption or organized crime in your region or country
• Import restrictions
• E-commerce policies
• Consumer and employee protections

E: Economic factors

The economy has a significant impact on any business. Consider the following economic factors that could influence your business operations:

• Current economic stability
• Projected growth and inflation rates
• Interest rates
• Fiscal policies
• Consumer habits and financial stability
• Unemployment rate and competition for jobs
• Access to credit (personal and business)

S: Socio-cultural factors

Socio-cultural factors consider the makeup of the population and your target demographics to understand how well your business can compete in the market. These factors might include age distribution, cultural attitudes, and workplace or lifestyle trends.

As you analyze the market, consider how the following factors could impact your organization:

• Population growth and demographics
• Generational shifts
• Consumer habits and values (e.g., focus on product quality or eco-friendliness)
• Family size and structure
• Consumer lifestyles
• Immigration rates
• Attitudes toward work

T: Technological factors

This step considers technology’s specific role and development in an organization and the industry, as well as broader technological trends and uses that affect society as a whole.

For example, one way technological changes have affected the workforce is by increasing access and availability of remote working opportunities. These changes have far-reaching consequences for the future of work and will impact how organizations structure their businesses and employees.

Other technological factors to consider include:  

• The organization’s access to new technology
• The competition’s access to technology
• Rate of technological change
• Evolution of infrastructure
• Government or institutional research

2. Identify opportunities

Once you’ve researched the various ways your organization is influenced and affected by external conditions, start identifying opportunities these changes could provide.

For instance, is there a technological development of which you could take advantage to increase efficiency? Or are there shifts in consumer demographics that could open new markets for your products?

Seek out as many opportunities as possible so you can develop the best strategic response for your business.

3. Identify threats

Unfortunately, change also comes with risks. Whether an economic downturn threatens your bottom line or a competitor’s access to new technology gives them a competitive edge, you need to identify potential threats to your organization so you can mitigate the risks and adapt your strategy accordingly.

The sooner you recognize threats, the more likely you are to avoid them or reduce their impact.

4. Act on your findings

With all your data collected and your opportunities and threats outlined, it’s time to take action. Incorporate these findings into your business plan to take advantage of opportunities and manage threats as soon as possible.

Use Lucidchart for your next PEST analysis

When it comes to PEST analysis, there are a lot of things to consider. Make the process easier with Lucidchart.

Lucidchart is an intelligent diagramming solution that helps businesses visualize their processes, people, and systems. Use Lucidchart’s ready-made business analysis and strategy templates to get started on your analysis today. Because Lucidchart is a cloud-based platform, you can work from multiple devices and easily share your documents with other contributors.

When you’re finished, start a new diagram in Lucidchart to map out your strategy so you can begin taking action on your findings ASAP.

Browse Lucidchart's business analysis and strategy templates. Go now

Browse Lucidchart’s business analysis and strategy templates.

About Lucidchart

Lucidchart, a cloud-based intelligent diagramming application, is a core component of Lucid Software's Visual Collaboration Suite. This intuitive, cloud-based solution empowers teams to collaborate in real-time to build flowcharts, mockups, UML diagrams, customer journey maps, and more. Lucidchart propels teams forward to build the future faster. Lucid is proud to serve top businesses around the world, including customers such as Google, GE, and NBC Universal, and 99% of the Fortune 500. Lucid partners with industry leaders, including Google, Atlassian, and Microsoft. Since its founding, Lucid has received numerous awards for its products, business, and workplace culture. For more information, visit lucidchart.com.

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4 steps of the PEST analysis process

A PEST analysis is a research tool that helps you analyze the surrounding political, economic, socio-cultural, and technological environment that can affect your business. Learn how this tool can help prevent risk and inform your team’s future business decisions.

Change can be scary. Oftentimes, the best way to deal with change is to understand it. Breaking down the causes for—and potential effects of—any unexpected changes can help your team digest what's happening and come up with an action plan that fits your needs.

That's where a PEST analysis comes in. Use this tool to better understand how external changes are impacting your business—and what you should do about it.

What is a PEST analysis?

A PEST analysis is a research tool that helps you analyze the external political, economic, socio-cultural, and technological changes that can affect your business. This is a shortened version, as sometimes the acronym is lengthened to PESTEL to include legal and environmental factors in addition to the first four. 

What does PEST stand for?

PEST is an acronym that stands for political, economic, socio-cultural, and technological. These are all external factors your team should consider when making business decisions. You may also see PESTEL which includes environmental and legal, in addition to the four mentioned previously.

The PEST analysis tool is useful for four main reasons:

Helps spot business opportunities and provides a warning in advance of any dangers or threats to your business.

Analyzes risks in your current environment so your business can avoid any projects that are likely to fail.

Creates an objective view of new or different markets based on quantifiable facts, instead of pre-existing assumptions on a specific region or market.

PEST analysis vs. SWOT analysis

A PEST analysis is often associated with a SWOT analysis , but these two tools focus on different parts of your strategy.

A PEST analysis is a tool to help analyze the external environment so your team can create more accurate decisions for big picture financial decisions. This is the tool you would use when you are considering any economic factors or potential changes to your business strategy .

A SWOT analysis narrows in on a more project-specific level. SWOT analysis helps to find strengths, weaknesses, opportunities, and threats for a specific project or business plan. You can use information from a PEST analysis to inform a SWOT analysis.

When to use a PEST analysis

A PEST analysis can help you break down and understand external conditions and changes that are impacting your business. You can use a PEST analysis reactively to understand unexpected changes or proactively to evaluate whether a market or decision is right for your company. Take a look at some specific instances where a PEST analysis can be beneficial.

When external forces drastically change

Sometimes external forces can change the business landscape drastically with no warning. This type of change happens quickly and, without the right tools to evaluate what's happening, they can feel really overwhelming.

A PEST analysis can help you break down the external political, economic, socio-cultural, and technological (plus environmental and legal) changes to quickly understand how they will influence your team. Use this tool to evaluate the impact these external factors will have on your team and pivot accordingly. 

For example, in April of 2022, COVID-19 lockdowns in China led to worldwide shipping delays . This type of delay impacts a huge swath of companies, and it’s hard to understand how—or when—your company will be impacted. A PEST analysis can help you extrapolate and predict how current external changes will impact your future strategy, so you can adjust accordingly.

Expanding into a new market

You can use a PEST analysis to look at topics you may not typically consider, such as economic and cultural factors, when you’re expanding into a new demographic or market. It’s helpful to have someone on your team who’s familiar with the new market to assist with developing strategy. If you don’t have someone who’s familiar with the new market, you may run into some cultural roadblocks you may not have considered as an outsider of that culture.

For example, in the 1960s, General Mills expanded their cake mix market into Japan after a successful run in America. They advertised being able to cook a cake in a rice cooker, since many Japanese households at the time did not have an oven. In Japan, rice is considered a sacred food, so the rice cooker was often solely used for that purpose—cooking rice. The thought was that mixing other ingredients into the rice cooker would change the taste of the rice itself. This oversight was one of the biggest reasons why cake mix sales did not meet expectations. This is a good example of how a PEST analysis could have prevented this cultural misstep.

Developing a new product

When you’re developing a new product, there’s a lot of research involved, including figuring out the ideal customer profile (ICP). A PEST analysis can help you think more about the external factors that affect your ICP and how that would influence their decision making process . 

On the business side, a PEST analysis can also help you understand how external factors affect the development of a new product. For example, an independent coffee company may be interested in finding a new source for their coffee beans. The sourcer would want to consider the political, economic, socio-cultural, and technological factors to ensure that their business practices are ethical and a good match for their business model.

4 steps of PEST analysis

While a PEST analysis covers large, overarching topics, the format for creating one is quite simple. Here are the four steps you take to complete a PEST analysis. 

Step 1: Brainstorm potential factors

In this first step, you’ll want to think about all of the environmental factors that affect your business as a whole. This is where the acronym PEST comes in. PEST stands for:

Political: Are there any elections coming up that may affect your business? Any initiatives on this ballot that may affect how your business performs? Are there any government regulations you need to consider before moving forward with your project?

Economic: What does the current economy look like—is it growing, plateauing, or declining? If you conduct business internationally, are exchange rates affected at all? Is the economy affecting your target market’s purchasing habits? Are there any tariffs or trade restrictions you should be aware of? What does the unemployment rate look like right now—will this affect your hiring plans?

Socio-cultural: Are there any societal attitudes that may affect your business? Are there employment trends in the areas you’re looking to hire? Are there any generational differences that may affect a customer's decision making process? Are there any social movements that are affecting potential career attitudes?

Technological : Are there any new technological innovations that can affect the way you conduct business? Do your competitors have access to a new technology that you may not have access to? Are you looking to add a new type of technology to your business that may affect how you conduct business?

Environmental : What impact will your new business venture have on the environment? What impact will the environment have on your business? Will weather greatly affect how your business operates?       

Legal: Are there any current laws or regulations that are affecting how your business operates? Should your team get into legal trouble, do you have a strategy in place for how to handle it? 

Step 2: Brainstorm opportunities

After you analyze the four different factors within the PEST acronym, consider any potential opportunities that your business can branch into. This is where a SWOT analysis comes in handy—after you brainstorm these four factors, you can use this analysis to inform how you can create a SWOT analysis as you expand your business. 

Consider the COVID-19 pandemic as an example. There were many different political, economic, socio-cultural, and technological changes that came with the lockdown. As a result, companies like Zoom experienced huge growth as teams turned to remote solutions that focused on collaboration and real-time connection.

Step 3: Brainstorm threats

Similar to how you would analyze threats for a SWOT analysis, this is where you consider any potential threats based on the information you gathered in step one. While you are assessing potential business threats, consider creating contingency plans in the event that a potential risk does happen. 

A common example of this scenario is an election year—how will you conduct business depending on the outcome of the election? Since election cycles happen consistently, your business has enough time to craft potential plans if an election can greatly disrupt your business.

Step 4: Take action

Based on all of the information you’ve gathered, now is the time to start the strategic planning process and establish your business goals . Understanding these potential threats, factors, and opportunities will help your team through the decision-making process and will inform your future strategy. 

Tip : Highlight key areas of your business plan and explain which external factor is affecting this decision. For example, you could highlight the fact that your business is located in a college town to explain why you’re looking to hire more entry-level employees to your team.

Document your PEST analysis with a work management tool

A PEST analysis is best used when your entire team has access to the information. Consider housing your PEST analysis in a project management tool like Asana . Asana helps your team organize tasks and mark dependencies, all while allowing your team to access important information asynchronously. 

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How To Write a Pest Control Business Plan 

You know how the saying goes: “Fail to prepare and prepare to fail.” This rings true when it comes to running a successful pest control business. 

One powerful tool is a business plan. This comprehensive living document details the ins and outs of your business and its operations. It keeps everyone involved on the same page. Better yet, it helps you make informed decisions that move you closer to your goals. 

In this article, we’ll take a look at the purpose of a business plan. We’ll break down its anatomy and give you step-by-step instructions on how to write one. 

Finally, we’ll share four quick and easy tips you can use to get started today. 

The Purpose of a Business Plan  

A business plan is a document that acts like a map to the future of your pest control company. It includes details about your goals and how you intend to achieve them. It outlines your services, operational practices, roles and responsibilities, finances, and more. 

Articulating this information serves three important purposes: 

1. It Guides Your Growth.  

When starting or growing your pest control business, a business plan gives you a clear path to follow. It helps you define what you need to do, when you need to do it, and how you can get it done. 

This guidance is crucial, especially in the early stages of your business. 

FROM ONE OF OUR PARTNERS: How to Grow a Pest Control Business  

2. It Helps Secure Funding.  

If you need to borrow money to start or expand your pest control company, a business plan is a must. It shows lenders you have a clear direction. 

You are dedicated to your business’s success. Show that you have the tools, team, and foresight to reach your objectives. 

Your business plan will also detail how much money you need and why. It might also detail how you plan to repay loans. This can give lenders and investors peace of mind. 

3. It Keeps Everyone on the Same Page.  

Your business plan is not set in stone. It will evolve over time. 

By keeping it up to date, you can use it to communicate your vision, mission, and plan to employees, stakeholders, and even potential buyers. 

This gets everyone in the same direction, which can motivate team members. 

The Anatomy of a Pest Control Business Plan  

A business plan is a structured document. It defines in detail the critical elements of your pest control business. There are specific sections common to all business plans. Sticking to them will help ensure you don’t miss any vital information. 

Let’s look at the anatomy of an effective business plan. 

Executive Summary  

The executive summary is the first section of your business plan. It provides a snapshot of your entire operation. 

Summarize the key points detailed throughout the plan. Include your mission statement and the pest control services you offer. Also, provide a brief overview of your market analysis. 

If your business is new, mention your reasons for starting it. Though this section should appear first, write it last to ensure it accurately reflects the rest of your plan. 

Business Description  

Outline your business goals and the specific needs of the community you serve. Include information about competitors and what sets your business apart from them. 

Explain your basic services, such as insect, rodent, or termite control. Mention any special methods you use, like eco-friendly pest management. 

Management and Organization Description  

Describe your company structure. Include information about the leadership team, their roles, and their expertise in pest control. 

If relevant, outline your company’s legal structure. Discuss any human resources policies and the number of employees you plan to hire. 

Products and Services Description  

Expand on the pest control services mentioned in the executive summary and business description. Provide details about: 

• The types of pests you handle 
• The techniques and products used 
• Any guarantees or follow-up services offered 

If you sell products like pest repellents or traps, describe these as well. 

Market Analysis  

Define your target audience. Be specific.  

Discuss the geographic locations you will target and common pest problems in these areas. Also, mention the typical clients you serve, whether residential homeowners or commercial businesses. 

Competitive Analysis  

While researching your market, compare your business to your main competitors. Identify their strengths and weaknesses.  

In this section, you’ll discuss how you plan to use this information to position your company in the market. Detail how you’ll address your customers’ needs better than your competitors.  

For example, environmental concerns are increasingly important to both commercial and household consumers. As a result, companies offering a wider range of eco-friendly options are gaining a competitive edge . 

Marketing Plan  

Outline how you will attract and retain customers. List your marketing strategies. 

Your approach might include a mix of traditional and digital marketing channels. Consider things like flyers delivered locally and social media ads. 

Explain your pricing structure and how it appeals to your target demographic. 

Describe your sales process from lead generation through customer follow-up. Emphasize customer service and satisfaction as key drivers. 

RELATED ARTICLE: 5 Pest Control Marketing Ideas That Generate Leads  

Operating Plan  

Explain the daily logistics of running your pest control business. Include information about your office location, storage for your equipment, and vehicle requirements. 

Discuss any necessary certifications or regulations you must comply with. Talk about your approach to service scheduling and customer relationship management. 

Finances  

Provide a clear picture of your business finances in this section. Include revenue projections and budgeting for expenses. Include your existing assets that will go toward the business, such as vehicles, equipment, and funds. 

If you are applying for funding, clearly state how much is needed and how you will use it. 

Offer a cash flow projection to show how your business plans to remain profitable. If you’re expanding your pest control business, you’ll also need to include financial statements. 

This section can be complicated. Accuracy is also critical. Working with a CPA to ensure your bases are covered is usually a good idea. 

Steps To Write Your Pest Control Business Plan  

Now that you know the sections you’ll need to address, it’s time to start writing. Here are the steps to create a practical and effective business plan: 

Step 1: Define Your Business Model.  

Before you begin writing, understand what your pest control business will offer. Ask yourself: 

• Will you focus on residential services, commercial contracts, or both? 
• Will you specialize in certain types of pests? 
• Will you operate seasonally or year-round? 

Knowing these details shapes the rest of your plan. 

Pro tip: Research local pest problems. Customize your services to the most common issues in your area. This can help you maintain a steady flow of work. 

RELATED ARTICLE: How to Start a Pest Control Business  

Step 2: Choose Your Business Goals.  

Set clear, achievable goals for your business. These could include financial targets, customer acquisition numbers, or expansion plans. 

Pro tip: Use the SMART criteria (specific, measurable, achievable, relevant, time-bound) to set your business goals. This method keeps your objectives clear and actionable. 

Step 3: Conduct Market Analysis.  

Analyze your local market to understand your competition and potential customers. 

Identify the demographics of your target market. Consider where your ideal customers live, their budgets, and what pest control services they most often need. 

Pro tip: Read online reviews of other local pest control companies. What specifically do customers like or dislike? Use these insights to better cater to your target audience’s needs and preferences. 

Step 4: Outline Your Marketing and Sales Strategy.  

There are two important points to consider in this section. 

First, think about how you will attract new leads to your business. An ongoing stream of leads is critical to your long-term success. 

You should also detail how you plan to retain customers. Customer retention means keeping customers loyal to your business . They choose you over your competitors time and time again. 

Second, write out your sales strategy. How will you turn a lead into a paying customer? What is the process from initial contact to a closed deal? 

Pro tip: Some ways to improve your customer retention rate include email marketing and loyalty programs. 

Step 5: Describe Your Team.  

Introduce your team and their roles within the company. Highlight their experience and qualifications, especially in pest control or related fields. 

Pro tip: Include bios that showcase the expertise of team members in dealing with specific pest problems. 

Step 6: Detail Your Operations Plan.  

Explain the day-to-day operations of your business. Include how services will be delivered, the equipment you’ll use, and your customer service approach. 

Pro tip: Create a checklist for each service visit to ensure consistency and thoroughness. This can help boost customer satisfaction. 

Step 7: Plan Your Finances.  

Project your financial performance, including startup costs, revenue forecasts, and profit margins. Make sure to include a budget for marketing, equipment purchases, and staff salaries. 

Pro tip: Use conservative estimates for your financial projections. This will help you prepare for unexpected costs or changes in business conditions. 

Step 8: Write Your Executive Summary.  

The summary is the first section of your business plan, but it should be written last. It summarizes all the key points of your plan, giving readers a quick overview of your business. 

Pro tip: Keep your executive summary short and compelling. 

FROM ONE OF OUR PARTNERS: A 5-Step Guide to Annual Planning for Your Business  

How You Can Start Writing a Pest Control Business Plan Right Now  

Here are four actions you can take today to get started: 

• Gather information. Collect data about the pest control market in your area. Research common pest issues and seasonal trends. Check out IBISWorld for industry-specific reports and market analysis. 
• Use business plan software. Simplify the business plan writing process by using specialized software. This can guide you through each section, ensuring you don’t miss important details. Try LivePlan or Bizplan . 
• List your top three competitors. Identify three main competitors in your local area. Analyze their services, pricing, and marketing strategies. 
• Decide on your timeline. Set realistic deadlines for your goals. 

Related Posts

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PESTLE Analysis

Insights and resources on business analysis tools

Key Elements of any Business Plan

Last Updated: Jun 21, 2016 by PESTLEanalysis Contributor Filed Under: Business

For a business to be successful, it requires extensive planning and analysis to survive in the market and industrial environment. Businesses conduct analyses to assess conditions and environment in which they are operating. Every company has certain frameworks that allow them to understand the market and analyze their products and services. Companies carry out market research by conducting surveys to evaluate market needs and trends. SWOT, PEST and STEEPLE analysis are methods through which companies plan ahead and forecast.

The PEST analysis refers to Political, Economical, Social and Technological factors which influence the business environment. SWOT refers to Strengths, Weakness, Opportunity and Threats. STEEPLE Analysis refers to Social, Technological, Economic, Environmental, Political, Legal, and Ethical factors. These factors are prime determinants of strategic planning. Without SWOT, PEST & STEEPLE analysis, companies might fail to achieve desired goals.

These are the 3 important key elements of a business plan:

SWOT Analysis

SWOT Analysis consists of internal positive factors that affect the business environment. It focuses on strengths, weakness, opportunities and threats. Strengths can be controlled and taken advantage of if firms focus and improve on their strengths in order to achieve their goals, focusing on USP (unique selling point) and enhancing the quality of their products/services. Weaknesses are negative internal attributes which point out what the company lacks or is unable to achieve, lower profits in specific department or products plus sales and internal structural problems.

Weaknesses need to be dealt with through proper evaluation and regulation. Opportunity is an external factor that represents reasons why business is likely to flourish. It is directly related to the firm’s external environment. Firms can use lower taxes, good market trends and a booming economy. Threats are external negative factors that challenge firms and pose a risk plus companies don’t have control over threats which can damage the firm or create uncertainty. This has a negative impact on the business. Unrest, new competitors, and government policies are some examples of external threats.

PEST Analysis

PEST analysis focuses on the macroeconomic issues that businesses face and how they can be dealt with. The PEST analysis comprises of external factors which are primarily used for market research. It is used as an alternative to SWOT Analysis . Political factors are the external factors that influence the business environment. Government decisions and policies affect a firm’s position and structure. Tax laws, monetary and fiscal policies as well as reforms of labor and workforce, all these factors influence companies in different ways.

These factors are important and need to be managed in order to overcome uncertainty.

Economic factors impact business in the long run. Inflation, interest rate, economic growth, and demand/supply trends are to be considered and analyzed effectively before planning and implementing. Economic factors affect consumers and enterprises both. Social factors are related to the firm’s products and services which they offer or the nature of the business. It involves the trends of population, domestic markets, cultural trends and demographics.

These factors help businesses assess the market and improve their products/service accordingly. Technological factors are key elements that impact a firm’s long-term planning. It analyses the technology trends and advancements in business environment, innovations and advancements and lowers barriers to entry plus decrease production levels which can result in unemployment. This includes research and development, automation and incentives.

STEEPLE Analysis

The STEEPLE analysis is used when working on strategic positioning and planning. It is more advanced as it covers external factors that affect the firm’s internal and external environment and structure. STEEPLE prioritizes factors in a practical way. The social factor is considered first in STEEPLE because social and cultural changes are important elements in business planning as they are directly related to what business excels at and produces or provides. Without proper demographic, living standards, cultural trends and marketing strategy knowledge, firms cannot progress.

Technological factors are second and relate to the same point as in PEST analysis as technology and innovation can create new opportunities as well as help reduce costs and increase demand if the technology is capitalized on effectively. Economic factors are third in priority since economic conditions are unpredictable and not in control of the business. The inflation rate, economic growth and trade levels need to be assessed and studied for planning ahead. Investments in unstable economies with inflation and other factors are unfavorable for the business.

Environmental factors impact the business environment because the decisions businesses take, affect their surroundings, Firms need to be socially and environmentally responsible because it favors the goodwill and reputation of the business. Political factors are the same as they are in the PEST analysis, because politics and government are two important elements that firms have to assess.

Government laws influence firms in many ways and controls the firm’s decision-making power because taxes, trade laws, labor laws, barriers to entry, subsidies and incentives plus interest rates and governments fiscal and monetary policies all are related to their day to day operations. So, firms need to have good relations with the government to peacefully continue. Legal factors are what STEEPLE analysis is about and that’s what makes it different from SWOT and PEST analysis .

This accounts for the regulations, audit and legal limitations of the firm as legal factors are barriers to entry plus firms are answerable to regulatory bodies if laws are not followed. Ethical factors refer to social values in the region where the firm is established. Firms need to respect and adapt the ethical values of the people they are catering to or else the business will get isolated. Corporate Social Responsibility is important as well as ethical values of the company because it determines whether the company is able to establish itself or not.

All analyses are good in terms of planning and research but in order to be successful, each analysis should be used according to the requirement of the firm. PEST & SWOT analyses are always to be used together since they help with strategic planning and marketing but STEEPLE is an advanced long-term analysis that covers all aspects and provides a larger picture.

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